Definitions

perestroika

perestroika

[per-uh-stroi-kuh; Russ. pyi-ryi-stroi-kuh]
perestroika, Soviet economic and social policy of the late 1980s. Perestroika [restructuring] was the term attached to the attempts (1985-91) by Mikhail Gorbachev to transform the stagnant, inefficient command economy of the Soviet Union into a decentralized market-oriented economy. Industrial managers and local government and party officials were granted greater autonomy, and open elections were introduced in an attempt to democratize the Communist party organization. By 1991, perestroika was on the wane, and after the failed August Coup of 1991 was eclipsed by the collapse of the Soviet Union, the establishment of the Russian Federation, and other dramatic political, legal, and economic changes.

See M. Gorbachev, Perestroika (1988); E. A. Hewett and V. H. Winston, ed., Milestones in Glasnost and Perestroyka (1991).

(Перестройка, ) is the Russian term (now used in English) for the economic reforms introduced in June 1987 by the Soviet leader Mikhail Gorbachev. Its literal meaning is "restructuring", referring to the restructuring of the Soviet economy.

The perestroika program

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 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 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 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 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.

See also

Notes

References in Pop Culture

In the game Grand Theft Auto 4, released April 29, 2008, Perestroika is the name of a local Caberet club in Broker.

In Tony Kushner's Tony award-winning Angels in America, the second half of the play is entitled Perestroika.

References

  • Cohen, Stephen F.; Katrina Vanden Heuvel (1989 repr. 1990). Voices of Glasnost: Interviews With Gorbachev's Reformers. W. W. Norton & Company.
  • Gorbachev, Mikhail (1988). Perestroika: New Thinking for Our Country and the World. Harper & Row.
  • Jha, Prem Shankar (2003). The Perilous Road to the Market: The Political Economy of Reform in Russia, India and China. Pluto Press.
  • Kevin O'Connor, Intellectuals and Apparatchiks: Russian Nationalism and the Gorbachev Revolution. New York, Lexington Books, 2006, 332 pp.

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