Gorbachev the Businessman : In Changing the Economy He Takes On All of Soviet Culture

If the new chief executive officer of a major American corporation such as IBM or General Motors wants to introduce fundamental policy changes, he must come to grips with the company’s culture.

This is precisely the situation in which Soviet leader Mikhail S. Gorbachev finds himself as he attempts to de-Stalinize the Soviet Union and open the closed society. He has embarked on a well-designed strategy that involves a systematic assault on the centrally planned Soviet economy, the self-serving Communist Party, the inflexible government bureaucracy and the police-state mentality.

If Gorbachev is to succeed, he must confront the culture of the largest risk-free society in the world--a society characterized by full employment, inexpensive housing, free education and medical care, low-cost transportation, the absence of bankruptcy and cradle-to-grave socialism. But that is exactly what he is doing, and he is doing it very effectively. The alcohol reforms, the clamp-down on corruption, the increased openness, the release of political dissidents and the call for secret balloting and a choice of candidates in party elections are all examples of significant changes taking place in the Soviet culture under Gorbachev.

Cynics claim that the Soviets have been talking about “changing the economic mechanism” for years. But they overlook the fact that 40-year-old Soviet managers are among a new breed altogether. They were only 6 years old when Josef Stalin died, they did not experience the oppressive political and economic conditions of the 1930s and 1940s and were spared some of the paranoid fears of those who lived through World War II.

Moreover, Soviet managers have studied the innovations taken by businesses such as IBM, Shell Oil, Dow Chemical and Burroughs Wellcome, and have concluded that such organizational techniques are well suited to large Soviet enterprises as they evolve from highly centralized functional organizations to less centralized multi-product, multinational organizations.

The Soviet managers of today are non-ideological, pragmatic technocrats whose values resemble those of their American counterparts. Those who have sampled Western-style consumerism--including aerobics, television, VCRs, designer clothes and fancy automobiles--seem to like it. Indeed, their values seem dangerously close to those of American “yuppies.” But these values are necessary to activate the incentives on which Gorbachev’s economic reforms are based.

When Raisa Gorbachev visited the Paris fashion houses of Pierre Cardin and Yves St. Laurent in 1985, Americans were told that this was communist propaganda aimed at the United States. Indeed it was propaganda, but the target audience was the Soviet Union. Six months later Pierre Cardin announced a new line of clothing for the Soviets to be manufactured in Soviet plants and sold in posh Moscow boutiques.

To increase productivity, Gorbachev has offered financial incentives to motivate managers and employees alike. Previously such incentives met with only limited success, since there were no high-quality consumer goods available for which the Soviets could spend their extra rubles. French designer clothes and other consumer goods imported from the West help energize the reforms.

There is an indirect benefit from Western imports that may be more important than any of the imported goods. Imports help break the monopolistic stranglehold that some Soviet enterprises possess over certain industries. More imports mean more competition in the Soviet domestic market. Through this strategy, combined with decentralized planning, flexible prices and wages and the use of production incentives, Gorbachev is injecting new vitality and flexibility into moribund Soviet enterprises.

To achieve his objective of integrating the Soviet economy into the global economy, Gorbachev has simultaneously centralized Soviet foreign-trade policy while dramatically decentralizing foreign trade itself. Twenty-one Soviet ministries and 70 major enterprises now have the right to trade directly with the West. It is possible for foreign companies to own up to 49% of the equity in Soviet joint-venture companies.

The power of the international marketplace is one of Gorbachev’s most important instruments of change. Contrary to the view of some American Sovietologists, Gorbachev is much more interested in exporting Soviet-made goods and services than communism.

The biggest obstacle to his reforms is not political ideology, but rather the lack of experience of Soviet managers in market-oriented planning and management practices--including marketing strategies, international finance and organizational development. Marxist-Leninist ideology is much more important to some American politicians than it is to Soviet managers.