Working Paper
Reforming Process and Consolidation in the Soviet Economy

One of the main reasons for launching a radical economic reform in the USSR is that the previous system of rigid administrative management failed to become efficient and to react adequately to internal and external developments. Disproportions and imbalances were a general phenomenon at both macro- and micro-levels. At the same time, the usual economic tools (monetary and fiscal policies, exchange rate, etc.) could not play their usual role, since there is no internal market as such in the USSR and the degree of demonetization of the economy is rather high.The process of reform-thinking in the USSR has been gaining momentum since the early-1980s. In mid-1980s it was followed by some short-term stabilization measures which tried to bring more discipline into production, to improve quality, and to solve urgent social problems. These measures, however, had only a limited effect. Since 1986 the pronouncements about reform became more radical, and they triggered the adoption of a package of legislative acts (though still incomplete) aimed at restructuring the whole economy.The key issue of the economic reform is the combination of economic centralism and autonomy. This task is extremely hard because of strong traditions of state interference in the economy, paternalism, and over-centralization of decisionmaking. The idea is that after the reform, economic agents (enterprises and firms) will have complete autonomy, self-support and self-financing. They are supposed to compete between themselves, thus breaking the monopolism of producers and a chronic "sellers' market".The intention is to create an appropriate environment for the performance of all economic agents, to develop a socialist market and to put to work its mechanisms of self-adjustment and stabilization, which will eliminate a large share of the present shortcomings. The center of economic decision-making is expected to concentrate attention on strategic issues, monitoring macro-processes, giving orientations to the market by indirect economic tools, distributing a part of total investments, implementing social programmes, etc. The planning system will play a different role than up to now, since the day-to-day operational activity of the enterprises will be out of its control.It is impossible now to predict precisely the future performance of planning and of the market. In any case, "marketization" of the Soviet economy does not. mean a complete reliance on market mechanisms in a laissez-faire sense. Nor will this country practice Darwinism in social processes, and social imperatives will always remain a criterion for appraisal of any economic policy.The reform tends to provide room for a sort of economic pluralism in the form of three sectors - public, co-operative, and individual. This will also contribute to a higher degree of individual freedom as far as the economy is concerned. At the same time, the public sector will have to prove its efficiency in practice by finding methods to overcome alienation and to realize the potential benefits of social property of the main means of production.Implementation of the reform encounters numerous short-, medium- and long-term problems. The theoretical foundations of practical policies prove to be inconsistent and compromising in some cases. The strategy is also subject to shifts in the sequence of reform steps and their radicalism. It is in essence a process of "learning by doing" that requires a flexible policy. Unfortunately, certain parts of the "package" are not synchronized enough -- e.g., reforms of pricing, planning, wages, banking and credit, taxation, and administration still lag behind, thus hindering the realization of far-reaching decisions and programmes. Discussions are just beginning around such topics as so-called "factor markets" (capital, labour), openness of the economy, etc.One must not underestimate the bureaucratic resistance to reform efforts, the enormous inertia, and the uncertainty of a considerable part of the population about the changing environment. These phenomena partly explain why the economic restructuring is not advancing fast enough, and why there was no radical change in 1987. There have been suggestions in favour of different scenarios for the pace and radicalism of the reform -- the radical one and a gradual one. Thus far a gradual evolution towards a new economic model (instead of a "shock therapy") looks more probable.Almost every month brings some new important development in the Soviet economy. Therefore, research of the implementation of the reform in the USSR should be continuous. This country's attempts to increase economic efficiency and to reinforce at the same time social guarantees for the population is of interest to others(this challenge is faced constantly by policy-makers and scholars in the developing countries). It could also be worthwhile to undertake special research in the areas of property, planning, role of the state, monetary policy, distribution, social policy in the USSR under the economic reform.