The Global Emerging Market in Transition: Articles, Forecasts, and Studies

Crisis and Recovery in Soviet Economy

CRISIS AND RECOVERY IN SOVIET ECONOMY The Soviet Union is only just beginning to understand the sheer scale of its economic problems, according to Professor Vladimir Kvint, a young Kremlin economic expert. In Kvint’s view, the USSR will scarcely have enough time to fully introduce the perestroika process this century and it could soon face serious inter-regional economic competition, a threatening energy shortage, and soaring raw material costs. Despite the difficulties he feels sure that the way to a foreign trade boom has already been opened up and that the introduction of market elements in the economy cannot now be avoided. Professor Kvint, 40, a member of the Siberian School of Economics has had a successful career as an academic and a practical manager in Siberia. He moved to Moscow at the start of perestroika on the staff of Mikhail Gorbachev’s economic adviser Abel Agenbegyan. The character of the Soviet economy is becoming more and more open. Contacts between Soviet business circles and foreign firms, official and unofficial, are extending rapidly as a result of economic reform. But the present economic reforms in the USSR are not the first in its history. There were attempts at reform in 1956 and 1979, but these were limited to theoretical rights. The basic idea was that everything was in good order ideologically, but that the economy required the benefit of a little economic reform. Only naı̈ve people can believe that economic reform is possible without significant political change. Siberia Ignored Many leading economists took part in earlier reform attempts, but without sufficient criticism. The real achievements of the Soviet economy were too little used; for example, the Siberian economic East–West Forum (Vienna), No. 4 (December 1989), pp. 76–77. 350 the emerging market of russia school was very critical in the Brezhnev period, but no one listened— even though the achievements of the school were well known. The reform process is like learning to swim, and we are not quite able to keep afloat yet. Political change has been relatively swift and has now overtaken economic reform. It would not be a good thing if political change were slower than economic reform, as has been the case in China. It would naturally be false to assume that there are no problems with groups and classes—there is an element, the size of which we cannot measure, that is opposed to reform. There is also a large passive section of society who are waiting for developments before they throw in their lot with either side. But in my personal view, there is no way back. Quality Problem When reform began in 1985 with a concept for acceleration, hardly anyone knew about the depth of the problems we faced. In 20 years the pace of our economic development had declined two and a half times: between 1966 and 1970 national income grew 7.3%; from 1971 to 1975 income grew 5.8%; between 1976 and 80 growth was 3.8%; and between 1981 and 1985 some 3.2%. This pace of growth has meant there have not been sufficient means available to fund social requirements of the USSR. Three percent income-growth is insufficient to cope with social growth. I can give concrete examples of detailed problems in our economy. We produce more shoes per person than most other countries. Unfortunately , the quality is in many cases so poor that the shoes remain unbought on the shelf and are returned to the factories to be reused as raw materials. The mechanization of Soviet agriculture is on a greater scale than in the U.S.A., but production is only 20% of U.S. production. In future, we will not need to produce more tractors , but to improve their quality and learn to use them more effectively . Attempts have been made to increase national income growth from 3.2% to 3.8%. This does not sound like an ambitious plan, but many possibilities for expansion appear to be exhausted. crisis and recovery in soviet economy 351 Energy Problems In the 1970s the USSR broke many world records in the use of water power and exploitation of oil resources—in 15 years oil production in Siberia increased from 1 million tons to 350. The tempo has stabilized and declined. Oil wells are having to pump ever deeper to maintain production. In my view, the plan for oil production will not...