In the USSR political and economic reform are inseparable, and the instability created by the fay of the old system offers the economy little hope. Charles Leadbeater
In the Soviet Union there is a race between reform and disintegration. Nationalist pressures in the Baltic states and Azerbaijan are threatening the fragile fabric of the Union of Soviet Socialist Republics. The political opening of glasnost has allowed Pent-up nationalist, religious and racist tendencies to emerge, as toxic as they were when they were put into cold storage by Stalinism. Yet the threats are not Purely nationalistic. These revolts against central authority are also economic. The nationalists hope that by gaining greater independence they will stand more of a chance of escaping the deepening economic crisis.
It is probably a forlorn hope. Some of the symptoms of that crisis are familiar: shortages, deteriorating quality and a raging black market for goods purchased with hard currency.
What is not fully recognised is how much the situation has deteriorated through the years of economic reform. A recent official survey found that only 106 Of more than 900 staple goods were in regular supply. Money incomes have risen strongly but supply has failed to keep pace. it is estimated that for each rouble in circulation there are only 0-18 roubles worth of goods to be purchased.
The economic reforms set in train in 1987 are widely felt to have worsened the situation. Soviet enterprises have been given a measure of freedom to keep a share of their profits and trade internationally. As the economy is dominated by monopolies, these enterprises have raised prices where they can and cut output.
Thus tales are rife of enterprises refusing to accept state Orders fOr gOOds because they are unprofitable. In the consumer goods industries enter. Prises have shifted their output from low margin, low profit lines, towards more profitable, more expensive forms of production, thus exacerbating shortages for staple goods. All enterPrises are desperate to get foreign currency to buy imports. So many are Selling as much as they can into foreign markets. Traditional supply lines, which were kept in place regardless of their profitability by the state planning system, are being severely disrupted.
Viewed from the level of the Soviet enterprise and the ordinary consumer, it looks more like a desperate struggle for survival than an orderly process of reform. Consumers are attempting tO bypass the market to get access to goods. Thus many enterprises are providing consumer goods directly to their workers as the only way to boost productivity. Paying them more roubles is pointless. But this direct provision Of goods merely exacerbates the shortages.
The economic system is fragmenting, broken by a combination of market-oriented reforms and self-interest, and the failure to deliver higher living standards has already provoked social unrest. The problem is that worse is to come. If the Soviet economy is to be revitalised there will have to be farreaChing restructuring. As yet the real pain has been put off. Very few factories have closed even though they are unprofitable. Most enterprise managers believe their prices would at least double if they had freedom from state control to set them. …