Gorbachev decree moves a step away from market economy

September 28, 1990|By Scott Shane | Scott Shane,Moscow Bureau of The Sun

MOSCOW -- Taking a major step away from a market economy, Soviet President Mikhail S. Gorbachev ordered yesterday every state enterprise in the country to sign new contracts with current suppliers and customers through the end of 1991.

In effect, the decree freezes existing economic relationships, many of them irrational and inefficient. Enterprises refusing to renew present contracts are threatened with fines of up to 50 percent of the value of the goods involved. It declares "inadmissible" any action by authorities on the local or republican level that disrupt existing economic ties.

The decree, read without comment last night on national television, is likely to add to the already considerable confusion about Mr. Gorbachev's views and intentions.

Like many other Soviet officials and ordinary citizens, he seems drawn alternately by the simplicity of the old, centralized, command economy and the freedom and potential abundance promised in the long run by a market economy.

The decree puts Mr. Gorbachev on a collision course with many of the 15 Soviet republics and particularly with the giant Russian Federation, led by Boris N. Yeltsin.

The republics consider themselves sovereign states with the right to control their own economic affairs, and the decree directly contradicts the plan for rapid economic change already approved in principle by the Russian Federation.

But with the economy a shambles, the Russian harvest rotting in rain-soaked fields and increasingly bold enterprises refusing to honor commitments that are unprofitable, Mr. Gorbachev apparently has decided a backward step toward the old economic system is necessary.

By requiring enterprises to honor and renew contracts that may be unprofitable, Mr. Gorbachev appears to be retreating from his stated support for the radical, 500-day plan for a transition to a market economy.

The plan, named for Mr. Gorbachev's economic adviser, Stanislav S. Shatalin, would deliberately wreak havoc with existing economic ties by dropping state subsidies to unprofitable farms and factories and selling off shops, small businesses, land and many industrial enterprises to private owners or stockholders.

Mr. Gorbachev's decree is a major victory for the more cautious, bureaucratic economic plan of Prime Minister Nikolai I. Ryzhkov, Mr. Shatalin's rival in the battle for the Soviet Union's economic future.

Mr. Ryzhkov had actively sought the presidential decree. It boosts the power of his Council of Ministers, the huge central economic bureaucracy that many republican officials believe should be drastically pruned or even closed entirely.

Most significantly, it gives the State Arbitration Board, part of the Council of Ministers, the power to impose fines on enterprises refusing to honor or renew existing economic contracts.

The decree gives the Council of Ministers the power to impose emergency controls over "railroads and other vital national systems." The vagueness of the wording appears to leave a loophole that could be used by the ministerial bureaucracy to reassert control over much of economic life.

The decree also orders both Mr. Ryzhkov's union government and the 15 republican governments to act within one month to restore production of medicines, which are running dangerously short.

It orders the spending of extremely scarce hard currency, if necessary, to increase production of medications. It says priority should be given in their production to ecological safety -- although pollution is a major reason for the closing of several pharmaceutical plants.

Some observers interpreted the decree as Mr. Gorbachev's first use of the expanded powers granted to him by the Soviet parliament this week to effect economic reform. But he has issued a number of similar economic degrees under his old powers, and it was not clear that he needed the expanded powers to issue this one.

The decree made no mention of the intensive debate over the competing economic reform plans. The parliament has given Mr. Gorbachev until Oct. 15 to draft a compromise between the two programs.

In the view of many economists, the most important difference between the two plans is that the Shatalin plan recognizes that economic policy should be set by the sovereign republics, while the Ryzhkov plan attempts to preserve a great degree of control by the union bureaucracy in Moscow.

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