Publicity campaigns once more accompanied economic reform initiatives. A remarkable burst of'openness' (glasnost') far exceeded anything witnessed in the Khrushchev era. The Soviet press and intelligentsia rediscovered the New Economic Policy, which was trumpeted (somewhat misleadingly) as a kind of golden age of economic freedom and dynamism.[15] Technocrats deplored widespread wastage (brak) in industry. Gorbachev denounced alcohol abuse and absenteeism. In a concerted attempt to boost economic growth, the leadership pinned its hopes on technological change in key sectors such as engineering. This policy of acceleration (uskorenie), closely associated with Prime Minister Nikolai Ryzhkov, failed to live up to expectations. Little came of an attempt to establish joint ventures with foreign firms. In 1987-8 more radical measures were introduced to reform property relations, extending from the legalisation of co-operative and private enterprise to the removal of restrictions on state enterprise. Unfortunately, the Law on State Enterprise (May 1987) failed to have the desired impact. The revival of the doctrine of commercial accounting (khozraschet), first formulated in the NEP era, implied that enterprises would no longer receive support from the state but would instead respond to consumer wants. However, firms were still expected to give priority to orders placed by the state authorities. In 1990, Gorbachev appeared to endorse a still bolder but hastily put together initiative for a '500- day' transition programme, which envisaged the privatisation of around three- quarters of all state enterprises and a liberalisation of prices. Responding perhaps to public anxieties about the consequences of radical reform, Gorbachev held back from committing himself to the adoption of the programme in its
entirety. [16]
What went wrong? The budget deficit spiralled out of control, a consequence of reduced tax receipts and a decision to maintain huge spending on consumer subsidies, as well as social welfare and defence. In 1984, before pere- stroika, the deficit was approximately 4 per cent of GNP. By 1989 it stood at 10 per cent. Two years later it had ballooned to 20 per cent. No serious attempt was made to institute a significant reform of the price system. Gorbachev negotiated fresh foreign loans, bequeathing a mountain of debt to his successors. The state kept the system afloat by printing roubles, whilst enterprises survived by granting one another vast credits. Inflation was rampant. The basic problem in late Soviet Russia, namely the failure to engineer economic and technological modernisation, continued unabated.
Perestroika unleashed a wave of dissatisfaction, from vested interests whose secure position in Soviet society was threatened, from workers who demanded improvements in food supplies and housing and from nationalists who declared that only independence could restore the fortunes of the Soviet republics. The reformers' stance appeared likely to threaten the perquisites of the Soviet elite. Yet not all Soviet bureaucrats opposed radical economic reform. Paul Gregory has distinguished between planners (apparatchiki) and entrepreneurs (khoziaistvenniki). The former were directly threatened by attempts to erode the supremacy of Gosplan, whereas the latter entertained the possibility of greater leverage within a more mixed economic system. Post-Soviet reform would subsequently demonstrate that they were well placed to take advantage of full-scale economic liberalisation. Workers also took to the streets to demand wage rises and greater enterprise 'autonomy'; to the extent that their demands were satisfied, costs increased and inter-enterprise debt accumulated. Gorbachev refused to sanction significant increases in retail prices.
As a result shortages of goods continued to mount, queues lengthened and popular disquiet intensified.
Did Soviet integration hinder economic progress in the various republics, as national activists claimed? Membership of the Soviet Union entailed subordination to an increasingly sclerotic planned economy, underwritten by the authority of the Communist Party. Arguably, it was the failings of the economic system, not their incorporation in the Soviet Union per se, that disadvantaged the constituent republics. The slowdown in economic growth that became apparent from the i970s helped to encourage nationalist dissatisfaction. Some nationalists saw opportunities to profit from secession rather than from continued membership of the Soviet state, regarding independence as a means of escape from Soviet (Russian) domination and exploitation. It dawned on them that tight central control and the imposition ofuniform solutions to economic problems had disastrous consequences. Dissatisfaction over the deceleration in economic growth went hand in hand with cultural complaint, which glasnost' fuelled in uncompromising fashion. The process was not confined to the non- Russian republics; Boris Yeltsin appropriated and Russified the most important all-Union institutions. Given the opportunity to secede, the nationalists took it unhesitatingly.
The radical privatisation impulse (ii): post-1991 experiments and consequences
The collapse of Communism ushered in a period of prolonged political uncertainty and socio-economic turmoil. Output plummeted. Investment remained weak and expectations of an influx of foreign capital went unrealised, thereby compounding the problems posed by an already obsolescent capital stock. Consumption declined. The Russian Federation found it immensely difficult to establish a secure and viable tax base. Economic relations with others in the Commonwealth of Independent States remained fragile. At the same time, this was an era of radical experimentation with capitalist economic forms. The advocates of economic transformation maintained that the costs of transition were exaggerated.
The post-Communist governments set great store by a radical privatisation of enterprise. In echoes of the Stolypin land reforms, the contemporary exponents of economic transition pinned much of their hopes on privatisation and the entrepreneurial flair that it was expected to unleash. However, the results were mixed. To be sure, the private sector expanded; by i996 around two-fifths of the labour force was employed in the private sector, compared to one-tenth a decade earlier. But there were significant costs. The so-called 'voucher privatisation' scheme in 1992-4 transferred ownership of thousands of enterprises, mostly to existing management and employees. It guaranteed neither good management of those enterprises nor the prospect of attracting outside investment. The loans-for-shares scheme of 1995-7 enabled powerful oligarchs to acquire cheaply from the state through rigged auctions some of Russia's most valuable oil companies including Yukos, Sibneft and Sidanco. In addition, predatory and criminal cliques flourished, hindering the potential viability of new enterprises and limiting the possibility for engaging with new markets and embracing technical change. So far as the agricultural sector is concerned, little land was transferred into private ownership from 1991. As under Soviet socialism, Russian peasants produced fruit and vegetables on household plots. The large collective farms continued in existence, but this probably testified to inertia rather than to their viability as integrated institutions that once supplied a range of services to the rural population. Peasant farmers did not rush to embrace the institutions of a market economy.
15
R. W Davies,
16
Ed Hewett described it as 'a valiant effort to reconstruct the union virtually out of whole cloth, on the basis of economic interests, rather than fear' (E. A. Hewett and V H. Winston (eds.),