Resuming his studies at the University of Kiev, upon graduation Liberman moved to Kharkov as an economist with the Workers' and Peasants' Inspection. He then enrolled in the Kharkov Labor Institute to study economics, remaining there as an instructor. Travel to Germany formed the basis for his theories of production planning. In 1933 he joined the faculty of the Kharkov Institute for Engineer Economics and became its dean. Evacuated following the German invasion of 1941, he worked in industrial planning in Kirghizia. In 1944 he joined the Research Institute for Finance in Moscow and three years later rejoined the Kharkov Institute. In 1950 he published Cost Accounting at an Engineering Works and Economic Management of a Socialist Enterprise. In 1956 he was awarded a doctorate and was appointed professor at the Kharkov Institute.
The basis of Liberman's economic theory was that profitability, rather than output, should be the central criterion for judging the economic success of socialist enterprises. This implied recognition of the principle of supply and demand previously unaccepted in Soviet economics, which had relied solely on output set by a central planning agency. His theories were a reflection of the debates going on in the Soviet Union during de-Stalinization. Leading Soviet economist Vasily Nemchinov brought Liberman's ideas to the attention of Premier Nikita Khrushchev and persuaded him to allow Liberman to publish an article in Pravda. This article, "Plans, Profits, and Bonuses," which appeared on 9 September 1962, became the basis for the economic reform program, appropriately known as Libermanism. Liberman argued not only that demand-driven production would lead to an increase in quality but also that profitability should be rewarded in the form of bonuses and higher wages. Khrushchev agreed, and in August 1964, shortly before his fall from power, he allowed limited experiment in two textile plants, the Bolshevichka in Moscow and the Mayak in Gorky.
Under Khrushchev's successors General Secretary Leonid Brezhnev and Premier Alexei Kosygin, the plan was confirmed by the Twenty-third Party Congress and supposedly implemented in a third of Soviet consumer products factories. The plan was doomed, however, because of widespread opposition among bureaucrats who had previously set production quotas and now did their best to sabotage its success by withholding necessary raw materials.
In 1963 Liberman joined the faculty at Kharkov State University. His reforms were curtailed in the early 1970s. The inability of the state to carry out meaningful economic reform was an important factor in the later collapse of the Soviet Union. Liberman died in the Soviet Union on 10 March 1983.
Spencer C. Tucker
Liberman, E. G. Economic Methods and the Effectiveness of Production. Garden City, NY: Doubleday, 1973.; Lovenduski, Joni, and Jean Woodall. Politics and Society in Eastern Europe. Bloomington: Indiana University Press, 1987.; Nove, Alec. An Economic History of the USSR. London: Penguin, 1984.; Spulber, Nicholas. Russia's Economic Transitions: From Late Tsarism to the New Millennium. Cambridge: Cambridge University Press, 2003.; Stcla, Pekka, and Mary McAuley, eds. Economic Thought and Economic Reform in the Soviet Union. Cambridge: Cambridge University Press, 1991.