Gorbachev the Economist

Marshall I. Goldman

From Foreign Affairs, Spring 1990

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Summary:  Gorbachev's political liberalization has not produced economic revitalization, but rather economic crisis which threatens his political survival.

Marshall I. Goldman is the Kathryn W. Davis Professor of Soviet Economics at Wellesley College and Associate Director of the Russian Research Center at Harvard University. This article is adapted from a paper prepared for the John M. Olin Critical Issues Seminar.

The Soviet Union today is a radically different place from what it was five years ago when Mikhail Gorbachev became general secretary of the Communist Party. Admittedly, Gorbachev promised then that his goal would be to reform Soviet economic and political life. But the Soviet people had heard similar promises before, almost all of which had ended up unfulfilled. No wonder few anticipated that in a few years the Soviet Union would in fact legalize the formation of such un-Soviet institutions as cooperative and private businesses, joint ventures with foreigners, and economic autonomy for several of the Soviet republics. It would have been even more farfetched to predict that there would also be glasnost, secret ballots, the disappearance of the secretariat of the Communist Party, the creation of a Supreme Soviet and a presidency that would usurp much power from the Central Committee and the Politburo, calls for regional secession and, finally, an end to the Communist Party's monopoly in political life.

Gorbachev deserves enormous credit, not only for what he has accomplished but also for the fact that he has managed to ride out these transformations-many of which have been rather tumultuous. But while his efforts at political liberalization have been extraordinarily fruitful, his attempts to revitalize the Soviet economy so far have failed. Economic reform was Gorbachev's number-one priority. He promised a radical transformation of the economy, which he eventually came to call perestroika. If it succeeded, the Soviet Union would be competitive not only in terms of conventional products such as machine tools, but also in the field of high technology. Equally important, soon after assuming power he promised to raise "the economic well-being of the Soviet peoples to a qualitatively new level."1

Unfortunately for the Soviet people, not only have they not enjoyed "a qualitatively new level" of economic well-being, their per capita real standard of living has actually fallen by what one respected Soviet economist estimates to be one percent per year.2 In addition, the Soviet economy now finds itself beset for the first time since World War II with an overt form of inflation that may exceed 20 percent a year, as well as persistent shortages of such basic products as sausage, salt, soap, school notebooks and sugar. A Soviet survey in early 1988 found that only 23 out of 211 varieties of foodstuffs were readily available in Soviet shops.3 Even bread, the one product that Soviet leaders have always tended to protect, has "sporadically" disappeared from the shelves of such normally well-provisioned cities as Moscow.4 Out of necessity, rationing of basic products such as sugar has been instituted, in many cases for the first time since 1947.

What produced this crisis? Why is such an enthusiastic reformer having such a hard time? And how much responsibility does he bear for what has happened?

II

In fairness to Gorbachev, the economic situation he inherited in 1985 could hardly be described as robust. It is hard to judge just how serious conditions were. As ...

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