Gorbachev’s Economic Reforms in the Context of the Soviet Political System
Since spring 1985 a warm wind of change has begun to envelop the Soviet Union, raising the prospect that the country’s immensely large and highly centralised institutional structure, particularly its economic sector, may soon begin to shrink and decentralise. This institutional structure has changed remarkably little since the early 1930s. It was established, it may be recalled, by a small group of single-minded communist revolutionaries to serve the implementation of their drastically new social order. The new institutions, initially at least, operated in a political and cultural environment very much hostile to that order and, in part because of that hostility, in a manner exceptionally authoritarian for nearly all and extremely unpleasant — indeed, tragic — for a large number of the Soviet people. That manner changed much for the better after Stalin’s death in 1953, when official ideology also became less rigid and more tolerant of other ideas. However, Khrushchev’s de-Stalinisation process was effectively stopped when Brezhnev came to power in 1964.
From Envy and Distrust to Trust and Ambition Eastern Europe's Problem: How to Solve It and Why It May Take Long
The monetary and fiscal problems that the Soviet Union and other Eastern European countries face today are important, but not only are they marginal relative to others, but also their solution depends on making credible legal reforms enabling private property righrs to emerge, be defined and be enforced first, before trying to implement other reforms (1). Unless this is done, no monetary, no fiscal policy and no exchange rate policy in the world will put these societies back to the road leading toward a better life. Recall that idea of communism could be — and was — summed up (in its Manifesto) in one sentence: the abolition of private property. This is at the root of their problems, and this is were the treatment should start. All the rest of the communist regimes’ undeniably big problems are only symptoms. Treating them rather than the sickness will not cure the patients. But even if such steps are firmly taken — and meanwhile in most Eastern bloc countries they are not: the symptoms are being treated, rather than the sickness — prosperity will not be around the corner. It will take years until credibility in the new legal system is established.
Soviet equilibrium technological gap and the post-1975 productivity slowdown
ConclusionThe Soviet and Western data on lead-times in invention, innovation, construction and diffusion appear to imply that the Soviet equilibrium technology gap is of the order of 10 to 15 years. If Soviet static inefficiency levels are as high as those reported by the Hanson-Hill and Rothlingshofer-Vogel studies, then the innovation and productivity slowdown in the years since 1975 may be interpreted as the consequence of the Soviet industry concluding the catching-up process and reaching its culture—and system related technological and productivity equilibrium gaps. Consequently, a state of maturity has been reached in which the duality factor no longer plays any significant role.The other factors—such as bottlenecks in productive infrastructures, a greater share of Siberian investiments, increasing complexity of the Soviet economy, lower growth of the Soviety R&D activity, lower labour morale and poorer work discipline and effort—may also have contributed to the slowdown. Our data on lead-times and manning levels relate to the 1960s and early 1970s. This paper suggests that we do not need to assume that these leads and levels have since changed for the worse to explain the post-1975 slowdown. However, the quality of these data is such that there is still considerable room for the influence of some or all of these other factors. A multitude of partial or alternative explanations can therefore live peacefully side by side and no ‘definite’ explanation of the slowdown can be expected. At the same time care should be taken to differentiate the symptoms, or the effects of growth slowdown, from its causes. One recent analysis of Soviet industrial slowdown discusses the evidence of slower investment growth, shortages of materials, energy constraints, and transportation bottlenecks (Schroeder (1985)). But investment goods, materials, energy supplies and transportation services are inputs which are themselves outputs. Their lower growth rates are therefore likely to be just intermediary, or short-term in cases of bottlenecks, causes of productivity slowdown, rather than the ultimate ones.The reader may have noted that this paper would not provide much comfort to Mr Gorbachev if his aim is, as it appears to be, to resume the catching-up of the TFA. At the same time our analysis suggests that the prediction of a continuing and significant technological and productivity regress vis-à-vis the TFA, one which a straight extrapolation of the performance during 1950–85 does imply for the post-1985 years, would be premature. Yet some movement in either direction from what I maintain to be essentially a growth equilibrium position, cannot be exclused. But unless systemic changes are really substantial, and Gorbachev's reforms do not appear to be of this category, these movements are in my view unlikely to be significant, especially since some new factors tend to counteract others (Hewett (1985); Hanson (1985)).