Reform Pioneer Assesses Progress. INTERVIEW: SOVIET ECONOMIST
Abel Aganbegyan, head of the economics section of the Soviet Academy of Sciences, was a precursor of current economic reform. His ideas were long considered unacceptable, but in some ways have been overtaken by more far-reaching proposals for economic change. His role now seems largely to be a traveling spokesman on Soviet economic reform. He was interviewed by editors during a recent visit to Boston. Excerpts: Is perestroika [restructuring] achieving in 1989 what it should have achieved by now?
The picture in different spheres of perestroika differs very widely.... In the areas of foreign policy and disarmament, there has been a great breakthrough. Hardly anyone would have expected that by 1989 the Soviet Union would have reduced military production by 19.5 percent.
But together with the pleasant surprises, life has handed us some bad ones. The country's financial situation has worsened. The budget deficit has increased. The gap between available money to the population and availability of goods has grown, and shortages in the consumer market have also increased. Then, of course, we were hit by very sad events: the earthquake in Armenia and after in Tadzhikistan.
Life to us is very contradictory. It's a mosaic and certainly not to be viewed in a rosy light.
Why the inability to deliver more consumer goods?
Unfortunately, there is no one single, simple reason. The first cause, of course, is our very difficult heritage.... Only about 8 percent of all capital investments in the industrial sector were allocated to services to the population, although these branches produced 37 percent of all profits....These are very backward areas of our economy.
Another cause is that we were not operating at a sufficiently energetic level in the past, and it still holds true. In 1985 our plans for expansion of these branches of the economy were very modest. By now we have corrected all of that. We have shifted military production into producing consumer goods. We took almost $3 billion of credit from West Germany and Italy to buy equipment for the food and light industries.
We were also very remiss in regulating the growth of income, wages, and money. To be crude about it, we lost control of the circulation of money. If we had had free-market prices, they would have grown by 20 or 30 percent. The majority of prices are rigidly controlled. That's the reason the goods disappeared.
Will the Soviet economy get worse before it gets better?
I think we know what must be done. I think within three or four years, our situation will be greatly improved. In other words, we will move ahead in saturating the market with commodities.
I think we've passed the low point, although possibly we might not have had to have reached it, if we had done management better.
How much tolerance is there in the political system if things do not get dramatically better soon?
The government is trying, of course, and is concerned. It's worried. We're doing a great deal of work that these efforts should bear fruit, but not right away. I had a rather extensive discussion with Mrs. [Margaret] Thatcher in England in November 1987. I remember she was very insistent in convincing me that perestroika was a very complicated matter, that one should not expect easy and quick solutions to problems. She said that when she started a minor version of perestroika in England, it took two years before any positive results appeared, and the situation even worsened somewhat.
Mrs. Thatcher's experience with perestroika involved a great deal of unemployment. Is this something the Soviet Union anticipates or would be willing to accept?
We do fear this. This is a real, genuine problem, and we have taken an entire system of measures in order to avoid unemployment. We set up employment centers throughout the country ... changed all kinds of laws. If someone loses his job through attrition, through forced cutdowns, the government is obliged to pay him three months of salary.
How much unemployment is acceptable as a price to reform the economy?
I feel that it is better not to have any unemployment. I am opposed to it. And I think that the state has means to avoid it, if that is made into a main goal.