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Russian term
Translit: perestroika
English: restructuring
Poster showing Mikhail Gorbachev, with the slogan perestroika

Perestroika (pronunciation , Russian: перестро́йка IPA: [pʲɪrʲɪˈstrojkə]) is the Russian term (which passed into English) for the economic reforms introduced in June 1987 by the Soviet leader Mikhail Gorbachev. Its literal meaning is "reconstructing", which refers to restructuring of the Soviet economy.


[edit] The perestroika program

During the initial period (1985-1986) of Mikhail Gorbachev's time in power, he talked about modifying central planning, but did not make any truly fundamental changes. 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 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. Enterprises bought inputs 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 (Государственный комитет по планированию, State Committee for Planning) 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 regime. 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 ventures 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 mostly government control 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 revenues from the sales of vodka plummeted during the anti-alcohol campaign and 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 supplier-producer relationships without contributing to the formation of new ones. Thus, instead of streamlining the system, Gorbachev's decentralization caused new production bottlenecks.

[edit] Unforeseen results of reform

Gorbachev's new system bore the characteristics of neither central planning nor a market economy. Instead, the Soviet economy went from stagnation to deterioration. At the end of 1991, when the union officially dissolved, the national economy was in a virtual tailspin. In 1991 Soviet GDP had declined by 17 percent and was declining at an accelerating rate. Overt inflation was becoming a major problem. Between 1990 and 1991, retail prices in the Soviet Union increased 140 percent.

Under these conditions, the general quality of life for the Soviet people deteriorated. The public traditionally faced shortages of durable goods, but under Gorbachev, food, clothes, and other basic necessities were in short supply. Fueled by the liberalized atmosphere of Gorbachev's glasnost and by the general improvement in information access in the late 1980s, public dissatisfaction with economic conditions was much more overt than ever before in the Soviet period. The foreign-trade sector of the Soviet economy also showed signs of deterioration. The total Soviet hard-currency debt increased appreciably, and the Soviet Union, which had established an impeccable record for debt repayment in earlier decades, had accumulated sizable arrears by 1990. It did free up the arts and social sciences in the region and enabled formerly banned literature and films to be reconstructed to a degree, with filmmakers like Sergei Parajanov now out of prison.

In sum, the Soviet Union left a legacy of economic inefficiency and deterioration to the fifteen constituent republics after its breakup in December 1991. Arguably, the shortcomings of the Gorbachev reforms had contributed to the economic decline and eventual destruction of the Soviet Union, leaving Russia and the other successor states to pick up the pieces and to try to mold market economies. At the same time, the Gorbachev programs did start Russia on the precarious road to full-scale economic reform.

The failures of perestroika have led Alexander Zinovyev to coin the word catastroika (Russian катастройка), a portmanteau of катастрофа - "catastrophe" and perestroika. Zinovyev wrote: "the effect of explanatory work has appeared the return desirable. All what wished to avoid, has occurred to the double force... Queues were extended. The prices in the markets have jumped up. At home, in queues, in transport, on work, at assemblies people have openly worn the perestroyka. Uncountable jokes were told. Someone has learned, that the word "perestroyka" is translated on the Greek language by a word "accident". On this basis a new word "katastroyka" has appeared. Pensioners and old members of a party have seen in perestroyka the counterrevolution and treason towards the Lenin's cause". Philip Hanson used this word in his book, From Stagnation to Catastroika: Commentaries on the Soviet Economy, 1983-1991.

[edit] Conspiracy theories involving perestroika

Some conspiracy theorists believe that the system of perestroika was put into place to deceive the West that Russia was friendly and that the Soviet leadership is still intact. Critics point to the fact that the many Soviet leaders were not tried for war crimes by their people after the collapse. They also point to the fact that Anatoliy Golitsyn, a KGB defector to the West has successfully predicted with 94% accuracy the results of the Soviet Collapse, such as the Fall of the Berlin Wall, etc. These predictions were written in a 1984 book New Lies For Old, and discussed more after the collapse of the Soviet Union in a 1995 book The Perestroika Deception.

[edit] See also

[edit] Further reading

  • Perestroika: New Thinking for Our Country and the World, Mikhail Gorbachev, Perennial Library, Harper & Row, 1988, trade paperback, 297 pages, ISBN 0-06-091528-5

[edit] External links


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