Soviets Plan to Allow Limited Free Enterprise

After months of public anticipation, the Soviet Union plans to unveil a new law this week allowing limited forms of small private enterprise similar to those permitted, then banned, in the 1920s.

The new law is widely expected to provide a legal framework for millions of individual repairmen and craftsmen who now moonlight illicitly from their regular jobs. For the first time in more than half a century, it is likely that families will be allowed to operate small enterprises such as restaurants, laundries, hairdresser’s salons and shops turning out small consumer goods.

Chronic Shortages

Severe and chronic shortages of consumer goods and services that Westerners take for granted have long been a major weakness of the centralized Soviet economy, which has traditionally operated on the dogma that any form of individual enterprise promotes the “exploitation” of workers.

The only major exception to this rule has been the private plots that collective farmers are allowed to maintain to supplement their income. While these small plots occupy only about 1% of cultivated land, they produce nearly a third of the country’s meat, vegetables and fruit.

The new law on “individual labor” is seen as an important part of Soviet leader Mikhail S. Gorbachev’s campaign to revitalize the nation under the rubric of perestroika, or reconstruction and modernization of the economy.

At least initially, however, reconstruction will probably stop well short of permitting the profusion of small, consumer-oriented businesses that have sprung up in the last few years under liberalizing legislation in Hungary, Poland and China.

No Details Published

No details of the new Soviet law have been published, but a recent report by the Tass news agency said the legislation will be on the agenda of the Supreme Soviet, the nominal Soviet Parliament, when it convenes today.

The Supreme Soviet normally holds two sessions a year lasting two days each and invariably adopts legislation by unanimous vote. But Tass left unclear whether a draft law would be adopted this week or merely unveiled for public discussion.

“Of course, until the draft law is published, to talk about it is difficult,” Tass said in a report suffused with coy enthusiasm for what it implied were great things to come.

“But to express a few of the most basic propositions is possible now,” the news agency said, noting that this law would explicitly permit new ways of earning income.

“With high probability, it may be supposed that individual labor may be applied to both the sphere of production and (consumer) service,” Tass said.

“Of course, it would be naive to expect that under the future law, someone would have the chance to engage in heavy production--say, to make some kind of equipment or machinery. But you will be able to produce in individual circumstances some types of needed consumer goods.”

Tass indicated, however, that the main thrust of the law will be to stimulate individual and family-run consumer services. It made clear that the hiring of non-family employees would still be prohibited, without specifying what constitutes a family under the law.

In an effort to discourage speculation that the Soviet Union is retreating from orthodox Marxist ideology, which still treats capitalism and its foundation of private enterprise as anathema, the Tass report insisted that when the Soviet authorities refer to “individual” and “family” labor, “there is nothing in mind resembling private enterprise.”

In what appears to have been a preliminary step toward adoption of the new law, the government promulgated a strict decree last May against unauthorized economic activity that at first appeared to rule out any form of individual enterprise. The decree against “unearned income,” which took effect on July 1, set fines and criminal penalties for a wide range of activities, such as the misuse of government property for profit.

Use of Cars for Taxis

For instance, the driver of a government car who used it as a taxi, as many do, would risk a fine equal to as much as $1,300 or two years in prison. Now, however, having defined what is not allowed in the way of individual enterprise, the government appears ready to clarify what is.

The potential scope is immense. Because of the nearly universal shortage of state-supplied services and consumer goods, Russians depend heavily on technically illegal but widely tolerated moonlighters for myriad needs, from taxi rides to automobile and apartment repairs and even state construction projects. According to published estimates, between 17 million and 20 million of the Soviet Union’s 280 million people are already engaged in “individual labor,” virtually all of it now na levo-- on the left, or illegal.

For months, as an example, official newspapers have carried on a sometimes heated debate over the practical, constitutional and ideological implications of letting private citizens legally use their own cars as taxis. Meanwhile, countless car owners supplement their income--and in some cases earn their living--doing exactly that.

Soviet newspapers are also filled with complaints about the shoddy quality of state-supplied apartment repairs, from plumbing to painting. According to the government newspaper Izvestia, workers moonlighting from their regular jobs are responsible for 45% of all dwelling repairs in the cities and 80% in the countryside, or the rough equivalent of $500 million worth of labor a year.

Covert family enterprises are also not uncommon, although a law setting out conditions for their legalization could lead to a broad expansion of small and badly needed enterprises, from restaurants to laundries and repair shops.

Reinventing the Wheel

While this may strike Westerners as an elaborate reinvention of the wheel, the idea has evoked excited discussion in some quarters of the Soviet press.

One state-owned dry cleaning shop in Moscow, for example, was found recently to have elements of a family enterprise--an elderly couple working together unofficially--which was said to explain the shop’s unusually courteous and efficient service.

“Our dry cleaner’s was like a store out of old (pre-Communist) Moscow,” Irina Strelkova wrote in a local paper, Moskovskaya Pravda. “They greeted customers like old friends. They would phone them at home and say, ‘Come pick up your clothing; it’s ready.’

“Of course, only the wife was officially listed as an employee. But for all practical purposes, the operation was based on the family-contract principle, which was what ensured efficiency and good order.”

Discussion of the merits of small private enterprise--always in terms of “individual” and “family” labor--has been accompanied by a number of favorable references in recent months to an early and controversial period in Soviet history known by its initials as “NEP,” or “New Economic Policy.”

Lenin’s Decree

Decreed by Soviet leader Vladimir I. Lenin in 1921 to quell growing popular discontent with the new Soviet authorities, NEP kept major industry in the hands of the state, along with banking and foreign trade, but legalized small private businesses. Peasants were left in control of their land, free to sell their produce on the open market.

Lenin died in 1924, and as Josef Stalin secured dictatorial powers in his place, he brought the policy to a harsh conclusion in 1928-29 with forced collectivization of the farms and the creation of a rigidly centralized economic structure that remains largely in place today.

Late last month, a leading Soviet economist declared that it was again time for changes in the economy as dramatic as those of Lenin’s New Economic Policy, although not necessarily the same changes.

“Now it is a different time, a different economy,” Leonid Abalkin, director of the Economics Institute of the Academy of Sciences, wrote in a journal for propagandists called Argumenty i Fakty.

“But there must be a striking break with the past, as under NEP,” Abalkin said.