NEWS ANALYSIS : Gorbachev, Mandate in Hand, Takes Uncharted Economic Path : Soviet Union: Obstacles and certainty lie ahead. But as the latest numbers show, urgent action is required.
Although President Mikhail S. Gorbachev has won his mandate to develop a market economy, bringing some of the most fundamental changes in Soviet history, he now faces a major struggle over the shape of that transformation.
With the authority to rule by decree for the next year and a half, Gorbachev has the power to move the Soviet economy from a system in which state ownership and central planning ruled for 70 years to one radically different, in which private enterprise and market forces become the engine of growth.
Yet, Gorbachev’s goals are distant and vague. His approaches to key issues, such as price reform, privatization and the ownership of land are still unresolved. And the prospects for ultimate success are uncertain despite the 66 pages of “guidelines” that Soviet lawmakers have endorsed as the basis for establishing a market economy.
Fierce battles, first of all between Gorbachev and Boris N. Yeltsin, the populist president of the Russian Federation, the largest Soviet republic, are inevitable because the nation’s future will be shaped in this transformation.
“To say that we are at a historic crossroads is already a cliche,” Roy A. Medvedev, a longtime dissident who now sits in both the Supreme Soviet and the Communist Party Central Committee, said last week. “But what other way is there to sum up this endeavor? And we are undertaking it with little more than faith in Gorbachev and the last hopes we have for a better future.”
The urgent need for action was again underscored over the weekend by the report of the State Statistics Committee on the country’s further economic decline in the first nine months of the year. The gross national product declined 1.5% from the same period last year. Industrial production, exports and the availability of consumer goods all declined, while inflation, unemployment and the time lost to strikes all were up sharply.
“The country has approached the line beyond which it would be plunged into socioeconomic chaos and complete disintegration of political and state structures,” Prime Minister Nikolai I. Ryzhkov said over the weekend. “The system of power already is practically paralyzed, and I dare say this because I myself am part of this system.”
What Gorbachev had asked the Supreme Soviet for, and was reluctantly granted, was a further political mandate. It was an expression of confidence in his leadership that, in fact, is not reflected in recent opinion polls or among the consumers, factory workers, coal miners and the country’s diverse minorities that vie with one another in their frustration and anger.
In one of his most important political victories, Gorbachev won that mandate by outlining a compromise between a radical proposal to transform the economy in a 500-day, forced march to the market and a cautious proposal by the government for a gradual transition that might require a decade to achieve the same goals.
The four-step program would impose emergency measures such as increasing consumer goods, followed by financial controls, establishment of a market system and a final stabilization period that would end the government monopoly in many industries.
The heart of the bargain, which was endorsed by top economists on both sides of the controversy, was a Gorbachev commitment to use his sweeping powers and the old bureaucracy--despite its proven inefficiency and lack of vision--to build a new economic system based on the radicals’ pro-market principles.
But can veteran central planners--people whose vision has been shaped by years deep in the Soviet bureaucracy and for whom free enterprise has always signified economic chaos and the evils of capitalism--manage a transition to a market economy?
The varied experience of Eastern Europe’s smaller socialist economies suggests that such a strategy is unworkable. But Gorbachev accepted Ryzhkov’s argument that the old bureaucratic methods of a planned economy must be used in the transition because the alternative--a year or more of near chaos--is too dangerous for a country of 290 million with global responsibilities.
Yeltsin had argued that combining the two approaches, as Gorbachev has done, is like “mating a hedgehog and a snake.” The radicals contend that the present economic structure must be virtually destroyed so that a natural market economy can develop. The moderates argue that such an approach would bring unacceptable suffering for most people and would even risk civil war.
“Those who today oppose social concord and who fan up passions,” Ryzhkov said, defending his moderation and implicitly criticizing Yeltsin’s radicalism, “are actually gambling with the fate of our people for the sake of their own personal ambitions. If the changes turn into chaos, violence becomes very possible.”
The solution to this contradiction of a market economy designed by central planners will be the emergency powers granted Gorbachev by the Supreme Soviet, the country’s legislature, to rule by decree until March 31, 1992.
Gorbachev, it is suggested, will use this authority, which is greater in law than that of any previous Soviet leader, to put into place the proposals of his economic advisers, all of them market advocates. At the same time, he is supposed to control the inflation, unemployment and social disorder that Ryzhkov and others fear.
Yet Gorbachev has neither a blueprint for this new economic system nor specific plans on how it will be achieved. While Nikolai Y. Petrakov, one of his top advisers, said that Gorbachev has dozens of reform decrees already drafted and ready to issue, he acknowledged that most of the major decisions will be made along the way.
In retreating from the “500-Day Plan” advocated by Stanislav S. Shatalin, a member of the policy-making Presidential Council, Gorbachev freed himself of its stern timetable of unequivocal steps to establish a market economy through the virtual destruction of the present system.
What he substituted were measures that Ryzhkov felt he could employ to achieve most of the same goals, but in a longer time period and with less disruption.
These guidelines leave unresolved crucial questions, which will likely determine the success of the transformation and the future political as well as economic character of the Soviet Union.
Although the privatization of state-owned enterprises will play a major role in the transformation of the economy, great differences remain over how much of industry and agriculture should be sold off and to whom and for how much. What will be done, for example, with the tens of thousands of enterprises, some of them vast industrial complexes amounting to virtual cities, that will never be profitable?
The question of private ownership of land remains so controversial that Gorbachev has called for a nationwide referendum on it. Without land reform, Yeltsin and his supporters contend, there can be no revival of agriculture in Russia, for farmers simply refuse to grow more for so little return on their labor.
Gorbachev’s plan calls for price reforms on a step-by-step basis without fully recognizing it as the key to the active interplay of the market forces of supply and demand--and without outlining how it will be achieved. Every economic reform in the Soviet Union in the last four decades has foundered on this point.
The program takes as its starting point a strong federal structure for the Soviet Union in the future. However, virtually all the constituent republics, including Russia, have declared their “sovereignty.”
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