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Gorbachev's economic reforms -- what will they accomplish?

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DURING a recent visit to the Soviet Union, I was struck by the Soviet news media's euphoric stress on Mikhail Gorbachev's economic reforms and the criticism of past economic practices. These twin points were also emphasized by the Union of Journalists of the USSR with whom we met. So a brief look at these reforms and what they may accomplish seems not amiss. First, why are reforms necessary? Because the Soviet Union is not competitive in the world marketplace. Unlike the industrialized nations of the West, it never really experienced the great revolution in industry that swept Europe and North America at the turn of the century. It jumped from a semifeudal, largely agricultural economy that prevailed before World War I directly into the communist central planning system after the 1917 revolution. It is true that for three decades after World War II it experienced accelerated economic growth, reaching about 5 percent in 1975. This, however, resulted largely from imports of technology, utilization of natural resources, and the transformation from a largely agricultural to a still noncompetitive industrial economy. Since then its growth has steadily shrunk to 2 percent a year, or a bit less.

The cause of Soviet noncompetitiveness is of course twofold: the low productivity of its labor force and above all its system of central planning -- the control by Moscow bureaucrats (economic managers, they are called) far removed from the marketplace. They make the detailed decisions as to types of items, quantities, and so forth for industry, agriculture, and virtually all aspects of the economy -- with one very important exception. This is the Soviet military. In a separate category, it consumes 14 percent of Soviet gross national product (double the US rate) and attracts the ablest scientists and managers for its programs. It produces first-rate weaponry, not adequately demonstrated by its less well-trained clients such as Syria and Libya.


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