Gorbachev's Perestroika: Unraveling the Soviet Union's Political System

 


To the outside world, the Soviet Union seemed Slightly different in 1984 from what it had been for at least a decade. Except for a few detractors, almost everyone agreed that the Soviet Union was the world’s second-largest economy and, if not the most powerful military force in the world. During that time it was producing more machinery, steel, oil, and natural gas than any other country in the world, and its stockpiles of nuclear and conventional weapons were at least double that of the United States.


But a considerable number of people within the system had begun to question the reality of that strength. In early 1983, Tat’iana Zaslavskaia, who was a social scientist, wrote a detailed study explaining the Soviet economy’s shortcomings and its upcoming inability to compete in the sphere of technological advancements made by the Western world. As per Zaslavskaia, the communist planning system had outlived its usefulness. According to her, central planning was good for guiding illiterate peasants into an industrial, urban workforce. However as the Soviet economy became more complex, the planners could not maintain a grasp over it. The control they had often served to stifle as much as it facilitated.



One of Zaslavskaia’s main criticisms was that the communist system was becoming more and more redundant. Over time, the Soviet industrial system was producing negative value: the value and the efforts put into many production processes were more costlier than the resulting final product. The resulting slow growth rate from the inefficiencies made it nearly impossible to provide a better life for the working classes, which the communist government had promised would be provided to them once an industrial base had been built.


By the end of 1984 Mikhail Gorbachev had joined the breed of thinkers who strongly believed that the Soviet Union’s economic system could not continue without overhauling reforms. Although he became the general secretary of the Communist Party of the Soviet Union in March 1985 he had, however, called in Zaslavskaia much earlier for a discussion about agrarian reforms and had also discussed the overall economic system.



Gorbachev later in his memoirs described how, by December 1984, he had a strong belief  “that it was impossible to live that way.” This meant a change in the country’s political and social system and its economy. That same month, while addressing a conclave of party officials, Gorbachev presented his thought process of what needed to be done. Although Konstantin Chernenko was still the nominal leader of the party, Gorbachev timed this speech to issue a clarion call for “perestroika”—or restructuring


Gorbachev spoke of speeding and intensifying production in the machine tool sector during the early months of his perestroika, though the precise meaning shifted from year to year. His vision of perestroika evolved after he was chosen as general secretary to include taking some authority away from the ministries and Gosplan, the state planning agency. This suggested a greater dependence on market mechanisms; at the very least, the harsh language used to characterize the market was noticeably softer. But other than one or two experiments, he didn't suggest any specific steps to increase the use of markets. In reality, it occasionally appeared as though the reverse was taking place.



For instance, Gorbachev replaced several of the economic ministries that were shut down by creating superministries. In turn, this led to the creation of the Gosagroprom agricultural ministry, which became even more powerful in deciding agricultural productivity and ultimately posed a barrier to agricultural reform. Even more startling, the Soviet Union began a crackdown on all private trading in July 1986. Nobody could sell something that they didn't make themselves. This took them back to the early 1930s.


Gorbachev came to the conclusion that he was going in the wrong direction in 1987. A new regulation allowing for private and cooperative trade as well as private manufacture was adopted in May of that year. At first, only retirees and students were permitted to join, but Gorbachev eventually let everyone in. At around the same time, the Soviet authorities also declared that foreigners would be permitted to establish joint ventures on Soviet soil. The joint ventures initially had severe restrictions (foreigners could not own more than a 49 percent interest in such ventures), just like private and cooperative trading. However, by 1990, foreigners might theoretically hold all the shares, albeit none really did.


At first, Gorbachev believed that this was a step that was too drastic, so he introduced an "Enterprise Law" that called for a progressive decrease in the amount of control that ministries had over company operations. Beginning on January 1, 1988, businesses responsible for creating 50% of the industrial production of the Soviet Union would only be needed to reserve around 80% of their output for distribution by central planning authorities.



The Enterprise Law, however, was a failure despite having the greatest of intentions. The managers refrained from using their new privileges while the ministers did everything in their power to maintain their authority. Selling independently made their life much more difficult because there was no wholesale market to assist them in finding consumers. Additionally, it was necessary to locate inputs outside of established state channels in order to dispose of output outside of the central planning process. The vast majority of managers made the decision not to switch to the market because they felt the risks and uncertainties outweighed the possible advantages.


Gorbachev continued in this unsure approach, dabbling in small experiments here and there without making a solid commitment to fundamental change. He urged economists to create a more thorough strategy after realizing that something more extensive was required. These plans included, to varying degrees, measures like greater reliance on markets to determine prices, free ruble conversion into other currencies, the elimination of subsidies for unsuccessful businesses, balanced state budgets, privatization of trade, industry, and agriculture, monetary reform, and demonopolization.


The Soviet Union had at least eight such comprehensive plans between October 1989 and mid-1991, but none of them appeared to adhere to Western ideas of what was actually required. However, since Gorbachev appeared to be more adept at requesting fresh studies than at carrying them out, the shortcomings of one proposal or another had little real bearing on real-world outcomes. Gorbachev never came across a proposal he disapproved of, but he also never found one he felt strongly enough about to carry it out. Gorbachev would give his approval to each new plan as it was finished. But he would also advise that it be combined with some earlier ideas. Industry and shop managers, whether private business owners or state bureaucrats, find it challenging to develop and put any long-term policies into action in such a setting.


To be fair to Gorbachev, no one has yet figured out how to successfully switch over in a reasonably short period of time from a Stalinist, centrally planned economy to a market-oriented one. The Soviet-style system evolved in quite different ways: the market shrank, pricing changed, people were reluctant to take initiative, and gaining money started to be seen as illegal and antisocial behavior. Furthermore, the government consciously established monopolies to avoid duplication.


This harm is difficult to reverse. Some nations, like Poland, have experimented with "shock therapy"—doing everything at once, including shifting to a market-based system of pricing, enabling currency reform, maintaining budget subsidies, and denationalizing and privatizing agriculture, business, and services. Others claim that the population is overburdened by moving too quickly. The employment of a more gradual strategy is also criticized since it enables the reformers' detractors to unite against them and put them down before they have a chance to triumph. In addition, the market system is designed to be a complete solution. For instance, if there is no price flexibility, subsidies will very certainly be required. Budget shortfalls as a result of this will lead to inflation.


Changing from a planned to a market system is difficult, in other words. The transition from a market to a planned system has been compared by Joseph Berliner and Kenneth Boulding to a forester clearing a forest. Even though it is harmful, the process is manageable if enough force is used. The opposite, however, is far trickier to do. It takes more than a few trees to create a forest. An entire ecological system of creatures, insects, and undergrowth exists in a forest. The same holds true for permitting a few private businesses to open.



Gorbachev was aware of his goals. Prior to losing power in 1991, his issue—and actually, one of the main causes—was that he wasn't sure what he wanted to transition to. Furthermore, he and all other leaders to date appear to be unable to execute that shift. Perestroika may not take centuries to implement, but it is likely to be a difficult and painful process.