Russia

Reform and Resistance

During several distinct periods, Soviet leaders attempted to reform the economy to make the Soviet system more efficient. In 1957, for example, Nikita S. Khrushchev (in office 1953-64) tried to decentralize state control by eliminating many national ministries and placing responsibility for implementing plans under the control of newly created regional economic councils. These reforms produced their own inefficiencies. In 1965 Soviet prime minister Aleksey Kosygin (in office 1964-80) introduced a package of reforms that reestablished central government control but reformed prices and established new bonuses and production norms to stimulate economic productivity. Under reforms in the 1970s, Soviet leaders attempted to streamline the decision-making process by combining enterprises into associations, which received some localized decision-making authority.

Because none of these reforms challenged the fundamental notion of state control, the root cause of the inefficiencies remained. Resistance to reform was strong because central planning was heavily embedded in the Soviet economic structure. Its various elements--planned output, state ownership of property, administrative pricing, artificially established wage levels, and currency inconvertibility--were interrelated. Fundamental reforms required changing the whole system rather than one or two elements. Central planning also was heavily entrenched in the Soviet political structure. A huge bureaucracy was in place from the national to the local level in both the party and the government, and officials within that system enjoyed the many privileges of the Soviet elite class. Such vested interests yielded formidable resistance to major changes in the Soviet economic system; the Russian system, in which many of the same figures have prospered, suffers from the same handicap.

Upon assuming power in March 1985, Gorbachev took measures intended to immediately resume the growth rates of earlier decades. The Twelfth Five-Year Plan (1986-90) called for the Soviet national income to increase an average of 4.1 percent annually and labor productivity to increase 4.6 percent annually--rates that the Soviet Union had not achieved since the early 1970s. Gorbachev sought to improve labor productivity by implementing an anti-alcohol campaign that severely restricted the sale of vodka and other spirits and by establishing work attendance requirements to reduce chronic absenteeism. Gorbachev also shifted investment priorities toward the machine-building and metalworking sectors that could make the most significant contribution to retool and modernize existing factories, rather than building new factories. Gorbachev changed Soviet investment strategy from extensive investing to intensive investing that focused on elements most critical to achieving the stated goal.

During his first few years, Gorbachev also restructured the government bureaucracy (see Perestroika , ch. 2). He combined ministries responsible for high-priority economic sectors into bureaus or state committees in order to reduce staff and red tape and to streamline the administration. In addition, Gorbachev established a state organization for quality control to improve the quality of Soviet production.