Perestroika
Encyclopedia
Perestroika (literally: Restructuring) was a political movement within the Communist Party of the Soviet Union during 1980s, widely associated with the Soviet
leader Mikhail Gorbachev
. Its literal meaning is "restructuring", referring to the restructuring of the Soviet political and economic system.
Perestroika is often argued to be a cause of the dissolution of the Soviet Union
, the revolutions of 1989
in Eastern Europe
, and the end of the Cold War
.
work more efficiently to better meet the needs of Soviet consumers. The process of implementing perestroika arguably exacerbated already existing political, social and economic tensions within the Soviet Union and no doubt helped to further nationalism in the constituent republics. Perestroika and resistance to it are often cited as major catalysts leading to the breakup of the Soviet Union.
in March 1985, he began a series of political reforms that were resisted by many established members of the Communist Party. However, Gorbachev appealed over the heads of the party to the people and called for demokratizatsiya
(democratization). For Gorbachev, demokratizatsiya originally meant the introduction of multi-candidate (but not multiparty
) elections for local Communist Party
(CPSU) positions and Soviet
s. In this way, he hoped to rejuvenate the party with progressive personnel who would carry out his institutional and policy reforms. The CPSU would retain sole custody of the ballot box.
In May 1987 the unauthorized landing of German amateur aviator Mathias Rust
next to the Kremlin enabled Gorbachev to remove many hardline opponents of his reforms, including Defense Minister Marshal Sergei Sokolov, from their positions in the military, and to consolidate his authority.
Gorbachev increasingly found himself caught between criticism by conservatives who wanted to stop reform and liberals who wanted to accelerate it. Meanwhile, despite his intention to maintain a one-party system, the elements of a multiparty system were already crystallizing.
Despite some setbacks, he continued his policy of demokratizatsiya, and he enjoyed his worldwide perception as the reformer. In June 1988, at the CPSU's Nineteenth Party Conference, the first held since 1941, Gorbachev and his supporters launched radical reforms meant to reduce party control of the government apparatus. He again called for multi-candidate elections for regional and local legislatures and party first secretaries and insisted on the separation of the government apparatus from party bodies at the regional level, as well. He managed, in the face of an overwhelming majority of conservatives (i.e., higher authorities), to force through acceptance of his reform proposals. It would seem that the conference was a successful step in promoting party-directed change from above.
At an unprecedented emergency Central Committee
plenum
called by Gorbachev in September 1988, three stalwart old-guard members left the Politburo or lost positions of power. Andrey Gromyko retired from the Politburo
, Yegor Ligachev
was relieved of the ideology portfolio within the Politburo's Secretariat, and Boris Pugo replaced Politburo member Mikhail Solomentsev
as chairman of the powerful CPSU Party Control Committee
. The Supreme Soviet of the Soviet Union then elected Gorbachev chairman of the Presidium of the Supreme Soviet, giving Gorbachev the attributes of power that previously Leonid Brezhnev
had. These changes meant that the Secretariat, until that time solely responsible for the development and implementation of state policies, had lost much of its power.
Meaningful changes also occurred in governmental structures. In December 1988, the Supreme Soviet approved formation of a Congress of People's Deputies
, which constitutional amendments had established as the Soviet Union's new legislative body. The Supreme Soviet then dissolved itself. The amendments called for a smaller working body of 542 members, also called the Supreme Soviet, to be elected from the 2,250-member Congress of People's Deputies. To ensure a communist majority in the new parliament, Gorbachev reserved one-third of the seats for the CPSU and other public organizations.
The March 1989 election
of the Congress of People's Deputies marked the first time that voters of the Soviet Union ever chose the membership of a national legislative body. The results of the election stunned the ruling elite. Throughout the country, voters crossed off the ballot unopposed communist candidates, many of them prominent party officials, taking advantage of the nominal privilege of withholding approval of the listed candidates. However, the Congress of People's Deputies that emerged still contained 87 percent CPSU members because of the previous seat-packing (one-third reserved for Communists). Genuine reformists won only some 300 seats.
In May the initial session of the Congress of People's Deputies electrified the country. For two weeks on live television, deputies from around the country railed against every scandal and shortcoming of the Soviet system that could be identified. Speakers spared neither Gorbachev, the KGB
, nor the military. Nevertheless, a conservative majority maintained control of the congress. Gorbachev was elected without opposition to the chairmanship of the new Supreme Soviet; then the Congress of People's Deputies elected a large majority of old-style party apparatchik
s to fill the membership of its new legislative body. Outspoken opposition leader Yeltsin obtained a seat in the Supreme Soviet only when another deputy relinquished his position. The first Congress of People's Deputies was the last moment of real control for Gorbachev over the political life of the Soviet Union. In the summer of 1989, the first opposition bloc in the Congress of People's Deputies formed under the name of the Interregional Group of Deputies. The members of this body included almost all of the liberal and Russian nationalist members of the opposition led by Boris Yeltsin
.
A primary issue for the opposition was the repeal of Article 6 of the constitution
, which prescribed the supremacy of the CPSU over all the institutions in society. Faced with opposition pressure for the repeal of Article 6 and needing allies against hard-liners in the CPSU, Gorbachev obtained the repeal of Article 6 by the February 1990 Central Committee plenum. Later that month, before the Supreme Soviet, he proposed the creation of a new office of President of the Soviet Union
, for himself to be elected by the Congress of People's Deputies rather than the popular elections. Accordingly, in March 1990 Gorbachev was elected for the third time in eighteen months to a position of Soviet head of state. Former first deputy chairman of the Supreme Soviet Anatoliy Luk'yanov became chairman of the Supreme Soviet, but for the first time in the history of the USSR this position was stripped of powers of the head of state. The Supreme Soviet became similar to Western parliament
s. Its debates were televised daily.
By the time of the Twenty-Eighth Party Congress in July 1990, the CPSU was regarded by liberals and nationalists of the constituent republics as anachronistic and unable to lead the country. The CPSU branches in many of the fifteen Soviet republics began to split into large pro-sovereignty and pro-union factions, further weakening central party control.
In a series of humiliations, the CPSU had been separated from the government and stripped of its leading role in society and its function in overseeing the national economy. However, the majority of its apparatchiks were successful in obtaining leading positions in the newly formed democratic institutions. For seventy years, the CPSU had been the cohesive force that kept the union together; without the authority of the party in the Soviet center, the nationalities of the constituent republics pulled harder than ever to break away from the union.
which he admitted the slowing down of the economic development and inadequate living standards. This was the first time in Soviet history that a Soviet leader had done so.
The program was furthered at the 27th Congress of the Communist Party
in Gorbachev's report to the congress, in which he spoke about "perestroika", "uskoreniye
", "human factor
", "glasnost", and "expansion of the khozraschyot
" (commercialization).
During the initial period (1985–1987) of Mikhail Gorbachev's time in power, he talked about modifying central planning, but did not make any truly fundamental changes (uskoreniye
, acceleration). Gorbachev and his team of economic advisers then introduced more fundamental reforms, which became known as perestroika (economic restructuring).
At the June 1987 plenary session
of the Central Committee of the Communist Party of the Soviet Union
(CPSU), Gorbachev presented his "basic theses," which laid the political foundation of economic reform for the remainder of the existence of the Soviet Union.
In July 1987, the Supreme Soviet of the Soviet Union passed the Law on State Enterprise. The law stipulated that state enterprises were free to determine output levels based on demand from consumers and other enterprises. Enterprises had to fulfill state orders, but they could dispose of the remaining output as they saw fit. However, at the same time the state still held control over the means of production for these enterprises, thus limiting their ability to enact full-cost accountability. Enterprises bought input from suppliers at negotiated contract prices. Under the law, enterprises became self-financing; that is, they had to cover expenses (wages, taxes, supplies, and debt service) through revenues. No longer was the government to rescue unprofitable enterprises that could face bankruptcy. Finally, the law shifted control over the enterprise operations from ministries to elected workers' collectives. Gosplan
's responsibilities were to supply general guidelines and national investment priorities, not to formulate detailed production plans.
The Law on Cooperatives
, enacted in May 1988, was perhaps the most radical of the economic reforms during the early part of the Gorbachev era. For the first time since Vladimir Lenin
's New Economic Policy
, the law permitted private ownership of businesses in the services, manufacturing, and foreign-trade sectors. The law initially imposed high taxes and employment restrictions, but it later revised these to avoid discouraging private-sector activity. Under this provision, cooperative restaurants, shops, and manufacturers became part of the Soviet scene.
Gorbachev brought perestroika to the Soviet Union's foreign economic sector with measures that Soviet economists considered bold at that time. His program virtually eliminated the monopoly that the Ministry of Foreign Trade had once held on most trade operations. It permitted the ministries of the various industrial and agricultural branches to conduct foreign trade in sectors under their responsibility rather than having to operate indirectly through the bureaucracy of trade ministry organizations. In addition, regional and local organizations and individual state enterprises were permitted to conduct foreign trade. This change was an attempt to redress a major imperfection in the Soviet foreign trade regime: the lack of contact between Soviet end users and suppliers and their foreign partners.
The most significant of Gorbachev's reforms in the foreign economic sector allowed foreigners to invest in the Soviet Union in the form of joint venture
s with Soviet ministries, state enterprises, and cooperatives. The original version of the Soviet Joint Venture Law, which went into effect in June 1987, limited foreign shares of a Soviet venture to 49 percent and required that Soviet citizens occupy the positions of chairman and general manager. After potential Western partners complained, the government revised the regulations to allow majority foreign ownership and control. Under the terms of the Joint Venture Law, the Soviet partner supplied labor, infrastructure, and a potentially large domestic market. The foreign partner supplied capital, technology, entrepreneurial expertise, and, in many cases, products and services of world competitive quality.
Gorbachev's economic changes did not do much to restart the country's sluggish economy in the late 1980s. The reforms decentralized things to some extent, although price controls remained, as did the ruble's inconvertibility and most government controls over the means of production.
By 1990 the government had virtually lost control over economic conditions. Government spending
increased sharply as an increasing number of unprofitable enterprises required state support and consumer price subsidies continued. Tax revenues declined because republic and local governments withheld tax revenues from the central government under the growing spirit of regional autonomy. The elimination of central control over production decisions, especially in the consumer goods sector, led to the breakdown in traditional supply-demand relationships without contributing to the formation of new ones. Thus, instead of streamlining the system, Gorbachev's decentralization caused new production bottlenecks.
's economic reforms
have similar origins but very different effects on their respective countries' economies. Both efforts occurred in large communist countries attempting to modernize their economies, but while China's GDP has grown consistently since the late 1980s (albeit from a much lower level), national GDP in the USSR and in many of its successor states fell precipitously throughout the 1990s.
Gorbachev's reforms were largely a top-down
attempt at reform, and maintained many of the macroeconomic aspects of the command economy (including price controls, inconvertibility of the ruble, exclusion of private property ownership, and the government monopoly over most means of production).
Reform was largely focused on industry and on cooperatives, and a limited role was given to the development of foreign investment and international trade. Factory managers were expected to meet state demands for goods, but to find their own funding. Perestroika reforms went far enough to create new bottlenecks in the Soviet economy, but arguably did not go far enough to effectively streamline it.
Chinese economic reform was, by contrast, a bottom-up attempt at reform, focusing on light industry and agriculture (namely allowing peasants to sell produce grown on private holdings at market prices). Economic reforms were fostered through the development of "Special Economic Zone
s", designed for export and to attract foreign investment, municipally-managed Township and Village Enterprises and a "dual pricing" system leading to the steady phasing out of state-dictated prices. Greater latitude was given to managers of state-owned factories, while capital was made available to them through a reformed banking system and through fiscal policies (in contrast to the fiscal anarchy and fall in revenue experienced by the Soviet government during perestroika).
Another fundamental difference is that where perestroika was accompanied by greater political freedoms under Gorbachev's glasnost
policies, Chinese economic reform has been accompanied by continued authoritarian rule
and a suppression of political dissidents, most notably at Tiananmen Square
.
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
leader Mikhail Gorbachev
Mikhail Gorbachev
Mikhail Sergeyevich Gorbachev is a former Soviet statesman, having served as General Secretary of the Communist Party of the Soviet Union from 1985 until 1991, and as the last head of state of the USSR, having served from 1988 until its dissolution in 1991...
. Its literal meaning is "restructuring", referring to the restructuring of the Soviet political and economic system.
Perestroika is often argued to be a cause of the dissolution of the Soviet Union
Dissolution of the Soviet Union
The dissolution of the Soviet Union was the disintegration of the federal political structures and central government of the Union of Soviet Socialist Republics , resulting in the independence of all fifteen republics of the Soviet Union between March 11, 1990 and December 25, 1991...
, the revolutions of 1989
Revolutions of 1989
The Revolutions of 1989 were the revolutions which overthrew the communist regimes in various Central and Eastern European countries.The events began in Poland in 1989, and continued in Hungary, East Germany, Bulgaria, Czechoslovakia and...
in Eastern Europe
Eastern Europe
Eastern Europe is the eastern part of Europe. The term has widely disparate geopolitical, geographical, cultural and socioeconomic readings, which makes it highly context-dependent and even volatile, and there are "almost as many definitions of Eastern Europe as there are scholars of the region"...
, and the end of the Cold War
Cold War
The Cold War was the continuing state from roughly 1946 to 1991 of political conflict, military tension, proxy wars, and economic competition between the Communist World—primarily the Soviet Union and its satellite states and allies—and the powers of the Western world, primarily the United States...
.
Summary
Perestroika allowed more independent actions from the various ministries and introduced some market-like reforms. The intention of perestroika, however, was not to end the command economy but rather to make socialismSocialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...
work more efficiently to better meet the needs of Soviet consumers. The process of implementing perestroika arguably exacerbated already existing political, social and economic tensions within the Soviet Union and no doubt helped to further nationalism in the constituent republics. Perestroika and resistance to it are often cited as major catalysts leading to the breakup of the Soviet Union.
Political reforms
After Mikhail Gorbachev took the office of General Secretary of the Communist Party of the Soviet UnionGeneral Secretary of the Communist Party of the Soviet Union
General Secretary of the Central Committee of the Communist Party of the Soviet Union was the title given to the leader of the Communist Party of the Soviet Union. With some exceptions, the office was synonymous with leader of the Soviet Union...
in March 1985, he began a series of political reforms that were resisted by many established members of the Communist Party. However, Gorbachev appealed over the heads of the party to the people and called for demokratizatsiya
Demokratizatsiya
Democratisation in the Soviet Union was proposed by General Secretary Mikhail Gorbachev in January 1987. He was calling for the infusion of "democratic" elements into the Soviet Union's single-party government. Gorbachev's democratisation meant the introduction of multi-candidate-not...
(democratization). For Gorbachev, demokratizatsiya originally meant the introduction of multi-candidate (but not multiparty
Multi-party system
A multi-party system is a system in which multiple political parties have the capacity to gain control of government separately or in coalition, e.g.The Conservative-Liberal Democrat coalition in the United Kingdom formed in 2010. The effective number of parties in a multi-party system is normally...
) elections for local Communist Party
Communist Party of the Soviet Union
The Communist Party of the Soviet Union was the only legal, ruling political party in the Soviet Union and one of the largest communist organizations in the world...
(CPSU) positions and Soviet
Soviet (council)
Soviet was a name used for several Russian political organizations. Examples include the Czar's Council of Ministers, which was called the “Soviet of Ministers”; a workers' local council in late Imperial Russia; and the Supreme Soviet of the Soviet Union....
s. In this way, he hoped to rejuvenate the party with progressive personnel who would carry out his institutional and policy reforms. The CPSU would retain sole custody of the ballot box.
In May 1987 the unauthorized landing of German amateur aviator Mathias Rust
Mathias Rust
Mathias Rust is a German aviator known for his illegal landing on May 28, 1987 near Red Square in Moscow. As an amateur pilot, he flew from Finland to Moscow, being tracked several times by Soviet air defence and interceptors...
next to the Kremlin enabled Gorbachev to remove many hardline opponents of his reforms, including Defense Minister Marshal Sergei Sokolov, from their positions in the military, and to consolidate his authority.
Gorbachev increasingly found himself caught between criticism by conservatives who wanted to stop reform and liberals who wanted to accelerate it. Meanwhile, despite his intention to maintain a one-party system, the elements of a multiparty system were already crystallizing.
Despite some setbacks, he continued his policy of demokratizatsiya, and he enjoyed his worldwide perception as the reformer. In June 1988, at the CPSU's Nineteenth Party Conference, the first held since 1941, Gorbachev and his supporters launched radical reforms meant to reduce party control of the government apparatus. He again called for multi-candidate elections for regional and local legislatures and party first secretaries and insisted on the separation of the government apparatus from party bodies at the regional level, as well. He managed, in the face of an overwhelming majority of conservatives (i.e., higher authorities), to force through acceptance of his reform proposals. It would seem that the conference was a successful step in promoting party-directed change from above.
At an unprecedented emergency Central Committee
Central Committee of the Communist Party of the Soviet Union
The Central Committee of the Communist Party of the Soviet Union , abbreviated in Russian as ЦК, "Tse-ka", earlier was also called as the Central Committee of the All-Union Communist Party ...
plenum
Plenum
Plenum may refer to:* Plenum chamber, a chamber intended to contain air, gas, or liquid at positive pressure* Plenism, or Horror vacui...
called by Gorbachev in September 1988, three stalwart old-guard members left the Politburo or lost positions of power. Andrey Gromyko retired from the Politburo
Politburo of the Central Committee of the Communist Party of the Soviet Union
The Politburo , known as the Presidium from 1952 to 1966, functioned as the central policymaking and governing body of the Communist Party of the Soviet Union.-Duties and responsibilities:The...
, Yegor Ligachev
Yegor Ligachev
Yegor Kuzmich Ligachev is a Russian politician who was a high-ranking official in the Communist Party of the Soviet Union . Originally a protege of Mikhail Gorbachev, Ligachev became a challenger to his leadership.-Early life:...
was relieved of the ideology portfolio within the Politburo's Secretariat, and Boris Pugo replaced Politburo member Mikhail Solomentsev
Mikhail Solomentsev
Mikhail Sergeyevich Solomentsev was a high-ranking Soviet politician. He was born near Yelets and graduated from the Leningrad Technological Institute in 1940. Solomentsev was a leading Communist party functionary in Kazakhstan in 1962–1964 and was in charge of the Rostov-on-Don obkom in 1964–1966...
as chairman of the powerful CPSU Party Control Committee
CPSU Party Control Committee
Party Control Committee of the CPSU Central Committee was a supreme disciplinary organ within the hierarchy of the Communist Party of the Soviet Union...
. The Supreme Soviet of the Soviet Union then elected Gorbachev chairman of the Presidium of the Supreme Soviet, giving Gorbachev the attributes of power that previously Leonid Brezhnev
Leonid Brezhnev
Leonid Ilyich Brezhnev – 10 November 1982) was the General Secretary of the Central Committee of the Communist Party of the Soviet Union , presiding over the country from 1964 until his death in 1982. His eighteen-year term as General Secretary was second only to that of Joseph Stalin in...
had. These changes meant that the Secretariat, until that time solely responsible for the development and implementation of state policies, had lost much of its power.
Meaningful changes also occurred in governmental structures. In December 1988, the Supreme Soviet approved formation of a Congress of People's Deputies
Congress of People's Deputies of the Soviet Union
The Congress of People's Deputies of the Soviet Union was the highest body of state authority of the Soviet Union from 1989 to 1991.-Background:...
, which constitutional amendments had established as the Soviet Union's new legislative body. The Supreme Soviet then dissolved itself. The amendments called for a smaller working body of 542 members, also called the Supreme Soviet, to be elected from the 2,250-member Congress of People's Deputies. To ensure a communist majority in the new parliament, Gorbachev reserved one-third of the seats for the CPSU and other public organizations.
The March 1989 election
Soviet Union legislative election, 1989
In 1989, elections were held for the Congress of People's Deputies of the Soviet Union. The main elections were held on 26 March and a second round on 9 April...
of the Congress of People's Deputies marked the first time that voters of the Soviet Union ever chose the membership of a national legislative body. The results of the election stunned the ruling elite. Throughout the country, voters crossed off the ballot unopposed communist candidates, many of them prominent party officials, taking advantage of the nominal privilege of withholding approval of the listed candidates. However, the Congress of People's Deputies that emerged still contained 87 percent CPSU members because of the previous seat-packing (one-third reserved for Communists). Genuine reformists won only some 300 seats.
In May the initial session of the Congress of People's Deputies electrified the country. For two weeks on live television, deputies from around the country railed against every scandal and shortcoming of the Soviet system that could be identified. Speakers spared neither Gorbachev, the KGB
KGB
The KGB was the commonly used acronym for the . It was the national security agency of the Soviet Union from 1954 until 1991, and was the premier internal security, intelligence, and secret police organization during that time.The State Security Agency of the Republic of Belarus currently uses the...
, nor the military. Nevertheless, a conservative majority maintained control of the congress. Gorbachev was elected without opposition to the chairmanship of the new Supreme Soviet; then the Congress of People's Deputies elected a large majority of old-style party apparatchik
Apparatchik
Apparatchik is a Russian colloquial term for a full-time, professional functionary of the Communist Party or government; i.e., an agent of the governmental or party "apparat" that held any position of bureaucratic or political responsibility, with the exception of the higher ranks of management...
s to fill the membership of its new legislative body. Outspoken opposition leader Yeltsin obtained a seat in the Supreme Soviet only when another deputy relinquished his position. The first Congress of People's Deputies was the last moment of real control for Gorbachev over the political life of the Soviet Union. In the summer of 1989, the first opposition bloc in the Congress of People's Deputies formed under the name of the Interregional Group of Deputies. The members of this body included almost all of the liberal and Russian nationalist members of the opposition led by Boris Yeltsin
Boris Yeltsin
Boris Nikolayevich Yeltsin was the first President of the Russian Federation, serving from 1991 to 1999.Originally a supporter of Mikhail Gorbachev, Yeltsin emerged under the perestroika reforms as one of Gorbachev's most powerful political opponents. On 29 May 1990 he was elected the chairman of...
.
A primary issue for the opposition was the repeal of Article 6 of the constitution
Article 6 of the Soviet Constitution
Article 6 of the 1977 Soviet Constitution placed limitations on the political rights of Soviet citizens. While the rest of the constitution theoretically assured the public freedom of speech, freedom of assembly and freedom of press these rights were rendered less meaningful by the reservation of...
, which prescribed the supremacy of the CPSU over all the institutions in society. Faced with opposition pressure for the repeal of Article 6 and needing allies against hard-liners in the CPSU, Gorbachev obtained the repeal of Article 6 by the February 1990 Central Committee plenum. Later that month, before the Supreme Soviet, he proposed the creation of a new office of President of the Soviet Union
President of the Soviet Union
The President of the Soviet Union , officially called President of the USSR was the Head of State of the USSR from 15 March 1990 to 25 December 1991. Mikhail Gorbachev was the only person to occupy the office. Gorbachev was also General Secretary of the Communist Party of the Soviet Union between...
, for himself to be elected by the Congress of People's Deputies rather than the popular elections. Accordingly, in March 1990 Gorbachev was elected for the third time in eighteen months to a position of Soviet head of state. Former first deputy chairman of the Supreme Soviet Anatoliy Luk'yanov became chairman of the Supreme Soviet, but for the first time in the history of the USSR this position was stripped of powers of the head of state. The Supreme Soviet became similar to Western parliament
Parliament
A parliament is a legislature, especially in those countries whose system of government is based on the Westminster system modeled after that of the United Kingdom. The name is derived from the French , the action of parler : a parlement is a discussion. The term came to mean a meeting at which...
s. Its debates were televised daily.
By the time of the Twenty-Eighth Party Congress in July 1990, the CPSU was regarded by liberals and nationalists of the constituent republics as anachronistic and unable to lead the country. The CPSU branches in many of the fifteen Soviet republics began to split into large pro-sovereignty and pro-union factions, further weakening central party control.
In a series of humiliations, the CPSU had been separated from the government and stripped of its leading role in society and its function in overseeing the national economy. However, the majority of its apparatchiks were successful in obtaining leading positions in the newly formed democratic institutions. For seventy years, the CPSU had been the cohesive force that kept the union together; without the authority of the party in the Soviet center, the nationalities of the constituent republics pulled harder than ever to break away from the union.
Economic reforms
In May 1985, Gorbachev gave a speech in LeningradSaint Petersburg
Saint Petersburg is a city and a federal subject of Russia located on the Neva River at the head of the Gulf of Finland on the Baltic Sea...
which he admitted the slowing down of the economic development and inadequate living standards. This was the first time in Soviet history that a Soviet leader had done so.
The program was furthered at the 27th Congress of the Communist Party
27th Congress of the Communist Party of the Soviet Union
27th Congress of the CPSU was held in Moscow. It was held after the deaths of Leonid Brezhnev, Yuri Andropov and Konstantin Chernenko. Mikhail Gorbachev was the General Secretary of the Central Committee of the CPSU...
in Gorbachev's report to the congress, in which he spoke about "perestroika", "uskoreniye
Uskoreniye
Uskoreniye was a slogan and a policy announced by Communist Party General Secretary Mikhail Gorbachev on April 20, 1985 at a Soviet Party Plenum, aimed at the acceleration of social and economical development of the Soviet Union...
", "human factor
Human factors
Human factors science or human factors technologies is a multidisciplinary field incorporating contributions from psychology, engineering, industrial design, statistics, operations research and anthropometry...
", "glasnost", and "expansion of the khozraschyot
Khozraschyot
Khozraschyot or Khozraschet was an attempt to simulate the capitalist concepts of profit and profit center into the planned economy of the Soviet Union....
" (commercialization).
During the initial period (1985–1987) of Mikhail Gorbachev's time in power, he talked about modifying central planning, but did not make any truly fundamental changes (uskoreniye
Uskoreniye
Uskoreniye was a slogan and a policy announced by Communist Party General Secretary Mikhail Gorbachev on April 20, 1985 at a Soviet Party Plenum, aimed at the acceleration of social and economical development of the Soviet Union...
, acceleration). Gorbachev and his team of economic advisers then introduced more fundamental reforms, which became known as perestroika (economic restructuring).
At the June 1987 plenary session
Plenary session
Plenary session is a term often used in conferences to define the part of the conference when all members of all parties are to attend.These sessions may contain a broad range of content from keynotes to panel discussions and are not necessarily related to a specific style of delivery.The term has...
of the Central Committee of the Communist Party of the Soviet Union
Communist Party of the Soviet Union
The Communist Party of the Soviet Union was the only legal, ruling political party in the Soviet Union and one of the largest communist organizations in the world...
(CPSU), Gorbachev presented his "basic theses," which laid the political foundation of economic reform for the remainder of the existence of the Soviet Union.
In July 1987, the Supreme Soviet of the Soviet Union passed the Law on State Enterprise. The law stipulated that state enterprises were free to determine output levels based on demand from consumers and other enterprises. Enterprises had to fulfill state orders, but they could dispose of the remaining output as they saw fit. However, at the same time the state still held control over the means of production for these enterprises, thus limiting their ability to enact full-cost accountability. Enterprises bought input from suppliers at negotiated contract prices. Under the law, enterprises became self-financing; that is, they had to cover expenses (wages, taxes, supplies, and debt service) through revenues. No longer was the government to rescue unprofitable enterprises that could face bankruptcy. Finally, the law shifted control over the enterprise operations from ministries to elected workers' collectives. Gosplan
Gosplan
Gosplan or State Planning Committee was the committee responsible for economic planning in the Soviet Union. The word "Gosplan" is an abbreviation for Gosudarstvenniy Komitet po Planirovaniyu...
's responsibilities were to supply general guidelines and national investment priorities, not to formulate detailed production plans.
The Law on Cooperatives
Law on Cooperatives
The Soviet Law on Cooperatives, enacted in May 1988, was perhaps the most radical of the economic reforms during the early part of the Gorbachev era. For the first time since Vladimir Lenin's New Economic Policy, the law permitted private ownership of businesses in the services, manufacturing, and...
, enacted in May 1988, was perhaps the most radical of the economic reforms during the early part of the Gorbachev era. For the first time since Vladimir Lenin
Vladimir Lenin
Vladimir Ilyich Lenin was a Russian Marxist revolutionary and communist politician who led the October Revolution of 1917. As leader of the Bolsheviks, he headed the Soviet state during its initial years , as it fought to establish control of Russia in the Russian Civil War and worked to create a...
's New Economic Policy
New Economic Policy
The New Economic Policy was an economic policy proposed by Vladimir Lenin, who called it state capitalism. Allowing some private ventures, the NEP allowed small animal businesses or smoke shops, for instance, to reopen for private profit while the state continued to control banks, foreign trade,...
, the law permitted private ownership of businesses in the services, manufacturing, and foreign-trade sectors. The law initially imposed high taxes and employment restrictions, but it later revised these to avoid discouraging private-sector activity. Under this provision, cooperative restaurants, shops, and manufacturers became part of the Soviet scene.
The most significant of Gorbachev's reforms in the foreign economic sector allowed foreigners to invest in the Soviet Union in the form of joint venture
Joint venture
A joint venture is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets...
s with Soviet ministries, state enterprises, and cooperatives. The original version of the Soviet Joint Venture Law, which went into effect in June 1987, limited foreign shares of a Soviet venture to 49 percent and required that Soviet citizens occupy the positions of chairman and general manager. After potential Western partners complained, the government revised the regulations to allow majority foreign ownership and control. Under the terms of the Joint Venture Law, the Soviet partner supplied labor, infrastructure, and a potentially large domestic market. The foreign partner supplied capital, technology, entrepreneurial expertise, and, in many cases, products and services of world competitive quality.
Gorbachev's economic changes did not do much to restart the country's sluggish economy in the late 1980s. The reforms decentralized things to some extent, although price controls remained, as did the ruble's inconvertibility and most government controls over the means of production.
By 1990 the government had virtually lost control over economic conditions. Government spending
Government spending
Government spending includes all government consumption, investment but excludes transfer payments made by a state. Government acquisition of goods and services for current use to directly satisfy individual or collective needs of the members of the community is classed as government final...
increased sharply as an increasing number of unprofitable enterprises required state support and consumer price subsidies continued. Tax revenues declined because republic and local governments withheld tax revenues from the central government under the growing spirit of regional autonomy. The elimination of central control over production decisions, especially in the consumer goods sector, led to the breakdown in traditional supply-demand relationships without contributing to the formation of new ones. Thus, instead of streamlining the system, Gorbachev's decentralization caused new production bottlenecks.
Comparison with China
Perestroika and Deng XiaopingDeng Xiaoping
Deng Xiaoping was a Chinese politician, statesman, and diplomat. As leader of the Communist Party of China, Deng was a reformer who led China towards a market economy...
's economic reforms
Chinese economic reform
The Chinese economic reform refers to the program of economic reforms called "Socialism with Chinese characteristics" in the People's Republic of China that were started in December 1978 by reformists within the Communist Party of China led by Deng Xiaoping.China had one of the world's largest...
have similar origins but very different effects on their respective countries' economies. Both efforts occurred in large communist countries attempting to modernize their economies, but while China's GDP has grown consistently since the late 1980s (albeit from a much lower level), national GDP in the USSR and in many of its successor states fell precipitously throughout the 1990s.
Gorbachev's reforms were largely a top-down
Trickle-down economics
"Trickle-down economics" and "the trickle-down theory" are terms used in United States politics to refer to the idea that tax breaks or other economic benefits provided by government to businesses and the wealthy will benefit poorer members of society by improving the economy as a whole...
attempt at reform, and maintained many of the macroeconomic aspects of the command economy (including price controls, inconvertibility of the ruble, exclusion of private property ownership, and the government monopoly over most means of production).
Reform was largely focused on industry and on cooperatives, and a limited role was given to the development of foreign investment and international trade. Factory managers were expected to meet state demands for goods, but to find their own funding. Perestroika reforms went far enough to create new bottlenecks in the Soviet economy, but arguably did not go far enough to effectively streamline it.
Chinese economic reform was, by contrast, a bottom-up attempt at reform, focusing on light industry and agriculture (namely allowing peasants to sell produce grown on private holdings at market prices). Economic reforms were fostered through the development of "Special Economic Zone
Special Economic Zone
A Special Economic Zone is a geographical region that has economic and other laws that are more free-market-oriented than a country's typical or national laws...
s", designed for export and to attract foreign investment, municipally-managed Township and Village Enterprises and a "dual pricing" system leading to the steady phasing out of state-dictated prices. Greater latitude was given to managers of state-owned factories, while capital was made available to them through a reformed banking system and through fiscal policies (in contrast to the fiscal anarchy and fall in revenue experienced by the Soviet government during perestroika).
Another fundamental difference is that where perestroika was accompanied by greater political freedoms under Gorbachev's glasnost
Glasnost
Glasnost was the policy of maximal publicity, openness, and transparency in the activities of all government institutions in the Soviet Union, together with freedom of information, introduced by Mikhail Gorbachev in the second half of the 1980s...
policies, Chinese economic reform has been accompanied by continued authoritarian rule
Authoritarianism
Authoritarianism is a form of social organization characterized by submission to authority. It is usually opposed to individualism and democracy...
and a suppression of political dissidents, most notably at Tiananmen Square
Tiananmen Square protests of 1989
The Tiananmen Square protests of 1989, also known as the June Fourth Incident in Chinese , were a series of demonstrations in and near Tiananmen Square in Beijing in the People's Republic of China beginning on 15 April 1989...
.
See also
- History of the Soviet Union (1982–1991)
- UskoreniyeUskoreniyeUskoreniye was a slogan and a policy announced by Communist Party General Secretary Mikhail Gorbachev on April 20, 1985 at a Soviet Party Plenum, aimed at the acceleration of social and economical development of the Soviet Union...
- GlasnostGlasnostGlasnost was the policy of maximal publicity, openness, and transparency in the activities of all government institutions in the Soviet Union, together with freedom of information, introduced by Mikhail Gorbachev in the second half of the 1980s...
- Democratisation in the Soviet Union
- 500 Days500 Days500 Days Program was an ambitious program to overcome the economic crisis in the Soviet Union by means of transition into market economy.The program was proposed by Grigory Yavlinsky and further developed by a work group under the direction of Stanislav Shatalin...
- Predictions of Soviet collapsePredictions of Soviet collapseThere were people who predicted that the Soviet Union would eventually be dissolved before the process of dissolution began with the fall of the Berlin Wall in November 1989....
- Revolutions of 1989Revolutions of 1989The Revolutions of 1989 were the revolutions which overthrew the communist regimes in various Central and Eastern European countries.The events began in Poland in 1989, and continued in Hungary, East Germany, Bulgaria, Czechoslovakia and...
- Wind of Change (song)