Can He Bring It Off?

By Thomas A. Sancton

At first glance, Moscow this summer looks much as it has for decades: office workers queuing up at street-side ice cream stands, red-kerchiefed flocks of Young Pioneers fidgeting in the mile-long line outside Lenin's Tomb, old women sweeping courtyards with twig-bundle brooms, faded red signs proclaiming VICTORY TO COMMUNISM. But beneath the capital's seedy, socialist exterior there is an unaccustomed hum of excitement. Passersby pore over posted copies of Moscow News, marveling at articles on (gasp!) official corruption and incompetence. Once banned abstract paintings hang at an outdoor Sunday art fair. In public parks and private living rooms, families plan futures that many believe will be better, richer, freer than ever before. To the delight of many Soviet citizens -- and the dismay of others -- their country is in the midst of its most dramatic transformation since the days of Stalin.

Mikhail Gorbachev's calls for glasnost (openness),* demokratizatsiya (democratization) and perestroika (restructuring) have become the watchwords of a bold attempt to modernize his country's creaky economic machinery and revitalize a society stultified by 70 years of totalitarian rule. In televised addresses, speeches to the party faithful and flesh- pressing public appearances -- often with his handsome wife Raisa -- he has spread his gospel of modernization. Translating his words into action, he is streamlining the government bureaucracy, reshuffling the military, moving reform-minded allies into the party leadership and allowing multicandidate elections at the local level. He has loosened restrictions on small-scale free enterprise and introduced the profit principle in state-owned industries. His policy of openness has encouraged the press to speak out more freely and produced an unprecedented thaw in the country's intellectual and cultural life. In the human-rights field, scores of political prisoners have been freed and the rate of Jewish emigration has been increasing -- to 3,092 for the first half of this year, up sharply from last year's level but far below the peak of 51,320 in 1979.

For all his innovations, the Soviet leader has hardly, at 56, become a convert to Western-style democracy. He rose to power through the Communist hierarchy and deeply believes in the tenets of Marx and Lenin. His goal is not to scrap that system but to save it from permanent economic decline through a series of bold, pragmatic measures. As he told a gathering of editors and propagandists in Moscow on July 10: "We intend to make socialism stronger, not replace it with another system."

Gorbachev's rejuvenating crusade raises the question of whether he can achieve durable change without provoking insurmountable opposition from party conservatives and fearful bureaucrats. After all, Nikita Khrushchev was swept from power 23 years ago for attempting reforms far less daring than Gorbachev's. More recently, when Deng Xiaoping's economic liberalization in China began to spill over into the political sphere, hard-liners rose up and forced the ouster of reformist Communist Party Chief Hu Yaobang early this year. Even if such internal party opposition does not stop Gorbachev, how far can he push change without unleashing democratic forces that could ultimately destabilize Soviet society? Mindful of that danger, Gorbachev warned the editors and propagandists that openness "is not an attempt to undermine socialism."

Gorbachev cleared a major hurdle at last month's Central Committee plenum, when he won backing for a far-reaching new law on state enterprises. The measure is intended to loosen the stranglehold of the central planning bureaucracy by giving greater independence to factory and farm managers. Among other provisions, it will require that local managers be elected by their workers and that the country's 48,000 state enterprises fund new and continuing operations from their own profits. Before the law takes effect next January, it must be accompanied by a package of enabling legislation dealing with such things as credit and finance, technological research and an overhaul of the state-controlled pricing system.

Gorbachev had in fact prepared eleven draft decrees along those lines, but chose not to put them to a vote at the plenum. Some Western analysts took this as a sign that he had yet to overcome resistance from conservatives among the Central Committee's 307 members, 60% of whom are holdovers from the Brezhnev era. Gorbachev is widely expected to seek a purge of such foot draggers at a national party conference that he has scheduled for June 1988. Nonetheless, the plenum left little doubt about his political strength, which was underscored by the naming of three of his supporters to the ruling Politburo. The new appointments meant that Gorbachev allies now occupy at least half of the 14 seats on the expanded Politburo.

Gorbachev had demonstrated his clout four weeks before the plenum by taking swift action against the military in the wake of West German Pilot Mathias Rust's spectacular landing just outside Red Square. When the Hamburg teenager's single-engine Cessna penetrated some 400 miles of Soviet airspace with impunity, Gorbachev immediately sacked Defense Minister Sergei Sokolov and Air Defense Chief Alexander Koldunov. In addition to giving the country an object lesson in the personal accountability of those in power -- and demonstrating the military's subservience to the political leadership -- Gorbachev seized the occasion to place a reform-minded ally, General of the Army Dmitri Yazov, 63, in the Defense Minister's job.

In the past month, and especially in the wake of the Central Committee session, Gorbachev has moved decisively in the direction of what he calls radical reform. Before the plenum, some Western analysts suspected that perestroika was largely a rhetorical exercise backed by a set of diluted half- measures. But Gorbachev's latest proposals, along with recent declarations by some of his key economic advisers, point to more far-reaching structural changes. Economist Abel Aganbegyan, for example, has advocated letting prices rise to market levels. At present, government subsidies on such items as food, clothing and shelter run to $114 billion a year, straining the government budget and encouraging shortages and inefficiency. Aganbegyan has also raised the possibility of closing "thousands" of unprofitable enterprises.

Similarly radical solutions were outlined by Economist Nikolai Shmelev in the June issue of Novy Mir (New World), a literary monthly. Lambasting inept managers for "their feudal ideology," he warned that "economics has laws that are just as terrible to violate as the laws of the atomic reactor in Chernobyl." Shmelev called for the introduction of free-market mechanisms even if that meant tolerating unemployment -- a concept virtually unheard of in the Soviet Union. Gorbachev later praised the article for painting a "picture close to what in fact exists," but he stressed his commitment to full employment.

Gorbachev must realize, however, that any meaningful reform of pricing and central planning will inevitably cause some inflation and unemployment. Another consequence of his proposals would be an increase in pay incentives, thus risking the creation of rich and poor in a society that has long been, for the most part, egalitarian in pay though not in perquisites. Perhaps a greater danger is that incentives may undermine the very ideological underpinnings of Communism and thus prove unworkable. Nonetheless, Gorbachev appears to be serious about that reform. As he said in his plenum speech last month, "It is particularly important that the actual pay of every worker be closely linked to his personal contribution to the end result, and that no limit be set." The Soviet leader also applied the profit principle to agriculture, calling for a sharp increase in small-scale private farming to supplement the inadequate output of the collective farms. In a departure from traditional Soviet thinking, he declared that "competition is central to activating the motive forces of socialism."

In these and other ways, the General Secretary has hurled new challenges at a nation that was temperamentally and ideologically unprepared for change. It is not surprising, therefore, that his policies have met with resistance from an entrenched party and government bureaucracy that is wary of losing its prerogatives. As Gorbachev put it in an interview with the Italian Communist Party daily L'Unita last May, "It is a question of old approaches, the inertia of old habits and of fear of novelty and responsibility for specific deeds. We are also being hampered by encrusted bureaucratic layers."

This opposition has no identifiable organization, leadership or platform. It includes an amorphous mass of party officials, civil servants and managers whose administrative foot dragging can stall or ultimately sabotage the reforms. Gorbachev has tightened his control over the Politburo, the party's supreme body, but he still faces formidable opposition from this large, inchoate group.

Even if he enjoyed unanimous support, Gorbachev would need a rare combination of skill and luck to solve the awesome economic problems that have been accumulating for a half-century. Stalin's legacy of centralized planning, collectivized agriculture and reliance on heavy industry, while effective at first in building up the Communist economy, ultimately produced a rigid and inefficient system. Having grown dramatically during the 1930s, the Soviet economy was sputtering along at an anemic average rate of 2% by the mid-'80s -- lower than any other industrialized country except Britain. Agricultural output rose less than 1% a year between 1971 and 1979 because of a combination of bad weather and bad management. Industrial production has been chronically hampered by supply bottlenecks, absenteeism and equipment failures. Most Soviet industrial goods remain far below worldwide standards in quality and design. A recent article in a Moscow newspaper noted that 40% of the 28,056 fires reported in the city last year were caused by faulty television sets. In a 1986 speech, Gorbachev cited the example of a TV factory in Kuybyshev that turned out 49,000 defective sets. Said he: "We cannot put up with such things."

Shoddy TV sets are typical of the Soviet consumer's woes. Moscow's elephantine planning bureaucracy, which fixes production targets for more than 70,000 items and sets some 200,000 prices each year, has traditionally stinted the production of consumer goods and favored the military, heavy industry and, with impressive results, the space program. Soviet shoppers have long been subjected to recurring shortages of such essentials as shoes, matches, fruits and vegetables. This summer there have even been shortages of those most common of Soviet staples, potatoes and onions. Some 20% of the country's urban population still lives in communal apartments, where several families must share a kitchen and a bathroom. Alcoholism and a decline in the quality of health care contributed to an alarming jump in the Soviet death rate, from 6.9 per 1,000 in 1964 to 10.3 in 1980 (the figure was 8.7 for the U.S. in 1980).

By the time Gorbachev came to power, the Soviet system was desperately in need of change, and the new General Secretary was determined to bring it about. As soon as he took office, Gorbachev began preaching perestroika, exhorting his fellow citizens to work harder, ordering a crackdown on alcoholism and vowing to "rap inefficient economic executives over the knuckles." Meanwhile, he launched his glasnost campaign in a bid to win the support of the intelligentsia.

Suddenly Soviet television began broadcasting frank discussions of social and economic problems. Press articles appeared on such subjects as drug abuse and juvenile delinquency. The picture magazine Ogonyok and the multilanguage weekly Moscow News started printing hard-hitting stories about corrupt officials, inefficient factories and alienated youth. Ogonyok, for example, has published such long-banned writers as Vladimir Nabokov and Osip Mandelstam. Moscow News has exposed police harassment of a journalist seeking to document shoddy construction of a power plant. Just how daring the press became is illustrated by a joke making the rounds in Moscow. A pensioner calls a friend and exclaims, "Did you see that incredible article in Pravda today?" "No, tell me about it," says the friend. "Sorry," the pensioner replies, "not on the phone."

Meanwhile, what is by Soviet standards a spectacular thaw has got under way in the cultural domain. During the past year more than a dozen previously banned movies have been screened before fascinated audiences. On the stage, plays like Mikhail Shatrov's Dictatorship of Conscience examine past failures of Communism. Anatoli Rybakov's Children of the Arbat, a novel that chronicles the murderous Stalinist purges of the 1930s, appeared in a literary journal after going unpublished for two decades. Last month a group of ex-political prisoners and dissident writers applied for permission to publish their own magazine, aptly titled Glasnost. The government has so far given no official answer, but the first issue, in the form of typed carbon copies, has been allowed to circulate freely.

By providing more journalistic and cultural freedom, Gorbachev has been able to produce an immediate, highly visible burst of reform at relatively little cost. A more difficult task will be introducing more demokratizatsiya into the political system, though here too the Soviets have taken some tentative first steps. Late last month, for the first time since the early days of Soviet power, voters in 5% of the country's roughly 52,000 districts were allowed to choose from party-appointed electoral lists with more candidates on the ballot than positions to be filled. The Supreme Soviet, the country's nominal parliament, voted to permit popular referendums on regional political and social issues and to allow citizens the right of judicial appeal against certain decisions by Communist Party officials.

For all his cultural and political innovations, Gorbachev's greatest challenge remains the economy. He has vowed to double economic output by the year 2000, though his policies have not yet begun to produce measurable results. Some critics say the reforms proposed so far involve more tinkering than reconstruction. Still, Gorbachev has launched an impressive array of initiatives to get the economy moving while preparing the way for more structural changes.

He has created a system of factory inspectors who can reject substandard products. Discouraged by the industrial ministries' reluctance to introduce new technology, he has formed conglomerates that combine both research and < production facilities. The new high-tech factories, most of them run by the Academy of Sciences instead of the ministries, will be allowed to keep part of any profits they earn. In addition, the Academy of the National Economy is functioning as a management training institute, with seminars and case-study courses similar to those at top U.S. business schools.

Several hundred of the 48,000 state-owned firms have already been put on a self-financing basis and have elected their own plant managers. Some 20 ministries and more than 70 large firms have been allowed to buy and sell products abroad without going through the bureaucratic bottleneck of the Foreign Trade Ministry. Part of the hard currency these firms earn from such transactions may be used to buy badly needed foreign equipment and technology. A similar strategy seems to be behind a new law permitting joint ventures with foreign companies. Under regulations adopted last January, a Western firm may hold up to a 49% interest in a venture with a Soviet company.

Gorbachev has also encouraged economic innovation in agriculture and the woefully inadequate service sector. In Moscow and Leningrad, collective farms are beginning to sell produce through their own outlets as well as through the state stores. A parallel development is the appearance of private-enterprise restaurants set up in competition with state-owned eateries (see box). Another flirtation with free enterprise is the new "individual-labor" law that took effect last May. It legalizes a kind of small-scale service business that may be run by an individual or family. Owners of private automobiles, for example, are now allowed to use their cars as taxis during their time off from regular state jobs, and skilled workers like carpenters and plumbers can legally take on private work. The government last week reported that 137,000 of these individual enterprises have been registered nationwide. For all its liberal trappings, however, the law seems aimed less at increasing consumer services than at bringing under state control -- and thus taxation -- a flourishing underground economy that is clearly essential to the day-to-day functioning of society.

The major obstacle to the spread of private enterprise, says Duke University Economist Thomas Naylor, "is not ideology but rather the lack of familiarity with market mechanisms." That shortcoming was illustrated recently by the baffled reaction of a shopkeeper in a state-owned Moscow clothing store when asked her views on the new private companies. Suppose someone wanted to produce shoes privately, she said. "Where would they get the leather or the rubber?" Such materials have always been distributed to state-run enterprises by Gossnab, the government's main supply agency. There is not yet a procedure under which a private shoemaker can purchase leather from a private tanner. Nor are there many credit institutions that would lend an individual producer money to start a business, much less provide the sort of venture capital that fuels entrepreneurship in the West. Work is currently under way to set up such structures.

The long-range effects of Gorbachev's policies are difficult to gauge. In 1986 the aggregate national income, roughly equivalent to the gross national product, increased by an impressive 4.1% (vs. 2.5% in the U.S.). Western experts attributed the rise to higher Soviet oil exports and the best grain harvest since 1958. Those are mostly short-term factors that do not reflect the fundamental changes the economy requires. With the current grain crop off to a bad start because of severe winter weather, this year's growth figure is likely to be lower.

Sustained economic improvement will be impossible unless Gorbachev can energize the apathetic Soviet masses. He has alienated many workers by demanding more discipline, harder work and better-quality output without giving them immediate benefits in return. His anti-alcohol drive has deprived the populace of a favorite pastime. "It's a vicious circle," says Marshall Goldman, a Soviet expert at Harvard University. "For workers to produce more, Gorbachev needs to offer them more consumer goods and services. Yet in order to be able to offer them more goods and services, he needs more productive workers."

Indeed, ordinary Soviet citizens appear to be generally supportive but widely skeptical of his reforms. When Sociologist Vilen Ivanov polled workers in a large plumbing-equipment factory, 62% complained that so far perestroika meant only more work. Conversations with workers bear out such ambivalence. "You cannot imagine how much inertia there is," says Boris, a sullen, red-faced young man who works in an aging Moscow metallurgical plant. "There are no changes at all in our factory, except that we get less money now. As soon as we became self-financing, our bonuses dropped because we weren't getting big subsidies from the state anymore. There may be reforms going on somewhere out there, but they certainly aren't here." %

A Ukrainian driver similarly wrote to the Central Committee last May: "We all vote yes, yes, yes for perestroika, but something is lacking. The desire burns inside, but when it comes out into the open it is all smoke and no fire." A woman living in a suburban Moscow housing block voices apprehension over the idea of price reform. "Whenever meat is available," she says, "the price is too high. If they raise the rent on this apartment, we will not be able to afford it. The authorities cannot raise prices because the people would have even less." Some older Soviet citizens express strong reservations about changes that they feel are compromising their Communist ideals. "I don't want life to turn into a race for rubles," says a 63-year-old educational administrator. "How can they call that Communism? This democratization smells like capitalism to me."

The new economic measures appear to have more enthusiastic backing among white-collar workers. "We've just become self-sufficient and have been promised pay increases," says a tall, well-dressed woman who works for a shoe-repair shop. "We'll be expected to do more for our money, of course, but we're all for that. I'm saving for the first time in my life." A middle-aged administrator in a Moscow carpet factory agrees that there has been visible change under Gorbachev. "People think what they're doing is more worthwhile," he says. "Russians were never given the chance to use their traditional wisdom because they were always being told what to do by bureaucrats. Now we are self-sufficient, and we feel more responsible about our work."

Whatever workers and bureaucrats may think, Gorbachev's glasnost has been greeted with an almost giddy euphoria by the intelligentsia. Says Yegor Yakovlev, editor of the innovative Moscow News: "We are hurrying, as if walking on hot coals. We want to show, print and stage all the things that were buried for decades as quickly as possible. We want to do it overnight."

That excitement is understandable. Gorbachev's reform campaign represents potentially the most wrenching transformation in the lives of Soviet citizens since World War II. But can he succeed? Many Western experts are doubtful. Predicts former U.S. Ambassador to Moscow Arthur Hartman: "Russian history will prove stronger than the modernizers. Real reform means distribution of power away from the center, away from the party. I don't think those guys will accept that voluntarily." Some students of Soviet history, noting that periods of reform have typically alternated with periods of reaction, suggest that Gorbachev's policies may proceed for a while and then be followed by a retrenchment, as his party and bureaucratic opponents organize to stymie them. Yet the Soviet leader has two things going for him: a lack of alternatives to his leadership and his image among the intelligentsia as the last best hope for reform.

Gorbachev may represent the West's last chance, at least in this century, of better integrating the Soviet Union into the world economy. There it would come under pressure to behave like a Western country, competing for capital and markets, lowering the barriers to foreign investment and even making its currency convertible. "The present seems to be an unusually promising time for doing business with the Soviet Union," says Peter Reddaway, director of the Washington-based Kennan Institute for Advanced Russian Studies. A senior U.S. diplomat in Moscow agrees, saying that Gorbachev "may be for real, in the sense that he's tackling the fundamentals."

The scope of Gorbachev's reforms and the vigor with which they are being pursued indicate that they are not merely a Potemkin village of minor improvements designed for foreign consumption. Standing before the Central Committee last month, Gorbachev irrevocably put his political future on the line in favor of principles that sound like those the West has always championed: economic freedom, individual rights and private initiative.

These concepts do not mean the same in the Soviet Union as in the West, and their application will certainly remain limited by Western standards. There is cause for concern that an economically rejuvenated Soviet Union would be an even more dangerous military rival than it is now. Yet if glasnost, demokratizatsiya and perestroika result in less repressiveness and more economic security, and if that helps make the U.S.S.R. a better global citizen and the world a safer place -- some very big ifs -- then the West too may benefit from Gorbachev's reforms.

FOOTNOTE: *In current Soviet parlance, the word's meaning is not so much openness as public airing or public disclosure.

With reporting by James O. Jackson, John Kohan and Ken Olsen/Moscow