LENINGRAD — A MARKET economy cannot be decreed from Moscow. It can only be created from the bottom of society. As long as the bureaucratic apparatus stands between the people and their future, perestroika will continue to fail. This has been the core of our long-simmering dispute with President Mikhail Gorbachev and his prime minister, Nikolai Ryzhkov.
But Gorbachev's embrace of the new plan proposed by his two economic advisers, Nikolai Petrakov and Stanislav Shatalin, (which closely AnatolySobchackparallels Boris Yeltsin's "500-day program" for the radical transition to a market economy) may have turned the tide and salvaged the reform movement. It shows that Gorbachev has finally sided with the desperate citizenry who had all but lost faith in the prospect of improving their lives.
In order to make room for initiative from below, the new plan calls for radical demonopolization of state industry, selling or leasing to private interests up to 70 percent of Soviet factories and 90 percent of construction enterprises, wholesale and retail stores, restaurants and other consumer services such as auto repair or barber shops.
Except for a price freeze on 100 or so essential goods such as bread, all other prices would be deregulated. (The government wants to double the price of bread.) The Shatalin plan would also significantly slash defense spending and massive subsidies that have propped up the vast inefficient sectors of Soviet industry and agriculture.
Perhaps most importantly, the new plan would grant each Soviet republic economic sovereignty -- the "exclusive right" to regulate ownership, use and management of all wealth and resources within its territory.
In the Russian republic (which has already formally adopted the Shatalin plan), we are also encouraging the return of all Russians from Middle Asian republics, the Caucasus and elsewhere, giving them homesteading land as we liquidate state farms. We believe this "rebirth of Russia" is the only thing that will turn around our agricultural disaster. Housing is also being transferred to private individuals.
Following these plans, the entire process of privatization is expected to be completed within two to three years. To accelerate the pace of change, we have declared Leningrad a "free economic zone" in order to attract foreign investment -- and ownership -- in the new private economy.
After years of upheaval that have produced no results, what we need now above all is a stabilization period for the consumer. In the effort to satisfy the consumer, no resources should be held back, including Russia's gold reserves.
Prime Minister Ryzhkov has warned that the far-reaching changes we propose will generate a backlash because they "infringe upon the vital interests of the working people." But the backlash has already occurred -- against the central government. That is why Yeltsin, Popov and I were elected. That is why Gorbachev was forced to accept the accelerated transition to the market.
The promise of a functioning market economy inspires more hope in the future than it inspires fear of unemployment and loss of security. The old ideology, which promised these things, but delivered stagnation for the masses and privileges for the communist elite, is thoroughly discredited.
In any event, we are more likely to face a labor shortage than unemployment. The lack of services is so severe and the production of consumer goods so paltry that private growth in these sectors can more than absorb the layoffs from manufacturing that will result from cutting subsidies.
In Leningrad, for example, the hotel business and the tourist infrastructure, including the manufacture of souvenirs, are pitifully underdeveloped. Roads and housing are in such bad shape that there is plenty of repair work to be done. Construction of new housing and the manufacture of building materials are also in high demand.
I believe that hope in an alternative future has also prepared the average Soviet citizen to live through coming price increases -- even without an increase in salaries (which, if raised on a wide scale, would undermine the effort to mop up the inflationary glut of rubles).
Moreover, the excessive amount of time people used to spend waiting in lines for cheap, excess goods can now be used to work privately for extra funds. That will more than compensate for price increases. What we have to focus on most of all is not keeping the lid on prices, but finding a way to fill the market with goods people want.
Having said that, the advantage we have over other countries in making a smooth transition to the market is that we have a price administration apparatus that can protect the less fortunate while the majority of society shifts to market relations.