Reforms Fail to Produce Economic Gains, Senior Soviet Official Says

Four years of reforms have failed to bring the dramatic economic improvements that the Soviet Union had hoped for, a top Soviet official said Friday, and the Communist Party leadership now believes that even bolder changes are urgently needed.

Vadim A. Medvedev, the party’s secretary for ideology and a member of its ruling Politburo, acknowledged in a major review of the country’s political and economic situation that “until now, no tangible results in meeting the everyday needs of the people have been achieved.”

Public impatience and disillusionment with the party and with the reform process, known as perestroika , were growing, Medvedev said, and this posed a threat to the country’s political and social stability.

“The people demand that the party should be guiding them more boldly, more decisively and more successfully,” Medvedev said.

“Great expectations have been aroused, but the situation, due to a combination of a number of unfavorable factors, has become more difficult.”

Medvedev’s frank review of the political, economic and social situation, delivered on behalf of the party leadership on the anniversary of the birth of V.I. Lenin, founder of the Soviet state, reflected both the critical self-appraisal now under way within the party and government and the sharper struggle to shape future policies.

With the victories of hundreds of ardent reformers, the parliamentary elections last month had been “a strong referendum in favor of perestroika, “ Medvedev said, but the defeat of hundreds of party officials across the country was, at the same time, “an acute criticism of various aspects of life, serious concern regarding the forms and the pace of perestroika and its material and social benefits.”

Figures released Friday by the Soviet State Statistics Committee showed that wages grew more than twice as fast as productivity in the first quarter of this year, further aggravating unsatisfied demand for consumer goods.

Nikolai G. Belov, the committee’s first deputy chairman, told a press conference that the growth in industrial production had slowed, exports had declined, imports increased and the overall growth in national income remained unchanged at 4% a year.

He said that the rates of growth of the country’s gross national product, its national income and industrial production were all below the planned targets, which themselves were the minimums needed to bring the economy back into balance. And, despite recent corrective measures, the basic situation remains unchanged, Belov added.

Readiness for Decisive Action

With President Mikhail S. Gorbachev sitting behind him in the Palace of Congresses in the Kremlin, Medvedev made clear the readiness of the Soviet leadership--at least the majority of the 12 voting Politburo members--to take decisive action on a series of controversial issues, including price reform, cutbacks in new construction, further reduction of the bureaucracy, expansion of foreign trade, “large but reasonable cuts” in defense spending and the introduction of market forces into the economy.

“The speed and scope of reform is clearly lagging behind the demands of (economic and social) development,” he said. “Many enterprises, ministries and organizations continue to work in the old style. . . . It is clear that we cannot go on without further efforts to dismantle this ‘braking mechanism.’ ”

Without going into details, Medvedev suggested that the leadership will seek approval from the party’s policy-making Central Committee, perhaps at a meeting scheduled for Tuesday, for a series of major economic reforms.

These would include a redefinition of what constitutes property and ownership rights--a fundamental change for Soviet socialism to allow private enterprise--and the “vigorous use” of market forces within what will remain a planned economy.

A central element of these plans, Medvedev said, would make the individual “master,” whether of the land he farms or the shop he runs or the factory where he works, in order to link increased production and efficiency to pay, bonuses and a direct economic interest in the success or failure of any undertaking.

At the same time, the government is determined to prevent a rapid rise in inflation, now usually put at a minimum of 7% a year, and is prepared to cut construction projects, defense spending, imports on some goods and the bureaucracy in order to maintain a financial balance while increasing the supplies of consumer goods and services.

Unless runaway inflation is prevented, Medvedev said, the economic reforms will collapse.

“Let’s be frank--if we fail to curb the overflow of money, a retreat to rationing of goods is unavoidable,” he said. “This problem has assumed political dimensions now, and its solution should also be political.”

Belov, the statistics agency official, described inflation and other economic problems as “alarming” and said their resolution was essential before the country attempted further reforms.

Average wages jumped 9.4% on an annual basis in the first three months of the year, while productivity grew only 4.5%, according to the official figures. The production of consumer goods rose by only 5.8%, and that led to a 10.8% increase in total savings at banks.

An official report last weekend said that an extra $8 billion had been added to the $51 billion set aside for importing consumer goods this year in an effort to satisfy this pent-up demand--and restore the value of the Soviet currency, the ruble, in buying products at local stores.

“The Soviet economy is going through a complicated, sometimes contradictory process,” Belov said. “And it is necessary to control the growth of income so that it is in line with the growth of productivity.”

Medvedev also reviewed political developments, reaffirming the party leadership’s determination to transform the country into “a law-governed state” where legislation enacted by elected representatives will determine policy, not declarations by party committees.

But the process of democratization has proven to be contradictory, Medvedev said. Many of those with grievances had taken to the streets in anti-government protest, he noted, “but none of the accumulated problems can be resolved through confrontation or extremism.”