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It's a Long Road to a New Soviet Economy : Individual Enterprise--and Risk--Are Keys to Restructuring

June 28, 1987|NIKOLAI SHMELEV | Nikolai Shmelev is an economist in the Soviet Academy of Sciences' Institute of the U.S.A. and Canada. His article in the June issue of the Soviet literary and public affairs journal, Novy Mir, proposing a drastic restructuring of the Soviet economy, has created controversy in Moscow.

MOSCOW — The Soviet economy is not in the best shape today. The existing economic mechanism, I think, suffers from three basic and closely related defects: production monopoly, or lack of competition, because there is a general shortage of basic goods in the country; little interest in scientific and technological progress on the part of industry; and weak incentives at the workplace, with the result that productivity and quality are low, especially in farming and construction.

All these things have resulted from years of administrative methods of management, from the idea that issuing orders from the top down is better than allowing a free interplay of economic forces--using prices, taxes, credit policy, and so on.

Restructuring is therefore designed to pave the way for more economic methods of management by giving greater autonomy to enterprises and increasing their self-sufficiency and self-financing--collectively, the now-popular concept in the Soviet Union of "full economic accountability."

It is unrealistic to expect that established ways will be changed all at once. It will take years, perhaps many years, before a new economic mechanism is constructed. We are just at the beginning of the road, but there is no way back.

Introduction of economic accountability will not call for much investment. The required ingredients are boldness, firmness and consistency in releasing bottled-up economic potential. Admittedly, there will be inevitable minuses, but a certain unpredictability will only be a minimum payment for economic revival.

The first step in going over to the new economic policy is seen by me as saturation of the consumer market (producing enough goods to satisfy consumer demand). And the quickest payoff here can be expected from the agricultural sector. To put the idea into effect, it is necessary to prohibit outside administrative meddling in the activities of the collective and state farms.

Prices should be set for all kinds of farm products so as to turn some unprofitable branches of agriculture into profitable ones. The funds can be obtained from cutting down on the state subsidies, now more than 50 billion rubles ($75-billion), for foodstuffs. Collective and state farms should be free to sell their products in the market, paying a state income tax, and individual small-holders should enjoy equal economic and social rights with collective farms.

Market saturation would be vastly promoted by the growth of family and cooperative businesses in the cities, notably in the services and in manufacture of consumer goods. This measure will require no big capital investments either.

The emergence of competition would cause state trade, services and light industry either to improve their work dramatically or cede a substantial part of their profits, with the ensuing consequences, such as lower wages, cuts in social spending by the enterprise, staff reductions and even the closing and disbanding of the business. Saturation of the market would not only strengthen confidence in changes for the better. It also would enhance the system of work incentives. Present incentives have little effect because wages or bonuses often cannot buy anything in the shops.

Attempts for central planning of the entire range of industrial goods (roughly 24 million items) are being supplanted by contracts between supplier and consumer. Combined with wholesale trade, which would supplant the present "rigid" distribution of raw materials and semi-finished products, and with open selling by enterprises of their surplus stocks and output over and above the plan, the contract system would become one of the pillars of enterprise autonomy.

This does not presuppose abandonment of the centralized planning of the economy. There would be only a reasonable sharing of competence between various tiers of the economic system. Central planners would have authority to decide national or strategic matters, while local authorities would deal with regional problems. Enterprises and associations would operate at their risk, fully responsible for the results of their production, and liable for losses and even bankruptcy.

Restructuring is, therefore, not a departure from socialism, but rather an attempt to bring the Soviet economy more up to its own ideals. Large-scale production based on public property would be supplemented by individual enterprise. State planning would begin at the grass roots.

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