Newspaper article THE JOURNAL RECORD

Gorbachev's Agriculture Restructuring Could Aggravate Soviet's Fiscal Crisis

Newspaper article THE JOURNAL RECORD

Gorbachev's Agriculture Restructuring Could Aggravate Soviet's Fiscal Crisis

Article excerpt

Mikhail S. Gorbachev's call for a ``drastic restructuring'' of Soviet agriculture, aimed at increasing food production long term, could aggravate his country's immediate fiscal crisis.

At a time of worsening agricultural shortages, Gorbachev has proposed a farm price increase next January, somewhat greater flexibility for farmers to negotiate the prices of what they sell and, ultimately, ``complete freedom'' to choose ways of marketing their products.

``We shall inevitably come to this, sooner or later,'' he said.

But inaugurating free markets, he said, will have to wait until price controls are ended, and, having witnessed the political explosion in Poland resulting from the attempt to unleash controlled food prices, Gorbachev is unwilling to risk a dash to free prices now.

He said price controls on staples like bread, meat and dairy products would not change for the next two or three years.

Government subsidies to agriculture account for 18 percent of the Soviet budget. With prices to farmers going up and prices to consumers held down, the Gorbachev proposals are likely to send farm subsidies higher, aggravating the budget deficit.

In earlier years, the true size of the Soviet deficit was obfuscated, but a report last October to the Soviet government disclosed that the budget deficit is now running at 11 percent of the gross national product, roughly triple the current United States ratio of the budget deficit to GNP.

Prof. Abram Bergson of Harvard, a leading American authority on the Soviet economy, said in an interview Thursday that the Soviet deficit lies at the root of its economic crisis. It has forced the government to increase inflationary pressure by printing too much money to finance the deficit. Meanwhile, its price controls have led to repressed inflation.

Consumer goods markets are more disorganized than ever. With so much money in consumers' hands, shelves are cleaned out of everything from foodstuffs to laundry soap. The situation gives a false impression of underlying shortages, as though supply had broken down, but its real cause is excess demand.

Gorbachev's efforts to loosen up the system is meeting resistance from conservative hard-liners, headed by Yegor K. Ligachev, a member of the Politburo.

Ligachev was the second-ranking member of the Politburo until the last reshuffle, when Gorbachev said there was no longer a ``No. 2.'' But the Soviet leader did not have the power to oust him from the Politburo; strangely enough, Ligachev was put in charge of the committee on agriculture, a post Gorbachev himself once held.

This might have been an attempt by Gorbachev to co-opt Ligachev to support his agricultural reforms; if so, it has not worked. …

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