THE MALTA SUMMIT : Gorbachev Faces Crucial Year as Economy Worsens

Time is quickly running out for Soviet President Mikhail S. Gorbachev, and 1990 appears increasingly likely to be the year when his reforms will succeed or fail.

The original economic crisis that forced the Soviet leadership to rethink 70 years of socialism has deepened. And as Gorbachev prepares for his Mediterranean summit meeting with President Bush this weekend, the Soviet Union’s empty stores mock his promises of plenty with the reform of socialism.

The dramatic political changes of the last four years--a free-wheeling Parliament, open debate on the most sensitive issues, multi-candidate elections, a virtually uncensored press--have not yet developed the muscle necessary to transform the whole Soviet system and resolve the country’s acute problems.

The restive non-Russian nations around the periphery of the Soviet Union are now a ring of mounting unrest that runs from the Baltic republics of Estonia, Latvia and Lithuania through Moldavia and the Ukraine down to Armenia, Azerbaijan and Georgia and across Central Asia. Their push for independence is spurred as much by despair of substantial changes in the Soviet system as by their resurgent nationalism.

Social discontent is growing rapidly. As the lines for food and consumer goods lengthen, tempers grow shorter and police report more and more street disturbances. Serious crimes have increased more than 35% so far this year. Strikes, rare a year ago, are becoming common, and worker slowdowns often paralyze whole regions or industries.

More than 40 million people--one in seven--now live below the official poverty line, subsisting on the equivalent of less than $80 a month. Inflation is running at nearly 10% a year, according to official figures, and this has more than eroded the pay gains of most of the middle class. Unemployment, once virtually unknown, has become a serious problem in certain regions. Corruption and black-market dealings have become the way of virtually everyone.

Amid all this, ordinary people are starting to demand to know when they will see the better life Gorbachev promised when he assumed the Soviet leadership five years ago.

Even his most dedicated supporters have developed an “eleventh-hour” psychology, and some have begun suggesting that Gorbachev ought to assume dictatorial powers to ensure the success of his program--although at what they concede would be the “temporary” cost of democracy.

“The future of our society will depend not only and not so much on the economy as on whether we manage to avoid political blunders capable of provoking citizens into taking anti-constitutional actions,” Otto Latsis, the influential deputy editor of the Communist Party journal Kommunist, said last week.

“The nation’s leadership must advance a series of political initiatives to help people regain their faith in reform and their faith in the strength of our socialist system that has been in for much battering lately.”

What has brought on such pessimism, skepticism, cynicism and fear is, most observers agree, the destruction of the country’s old political and economic system without its replacement by the socialist millennium that Gorbachev had suggested could come with perestroika , his program of economic and political restructuring .

Only 23% See Gains

The scale of this crisis of confidence became apparent in a survey conducted last month by the National Center for the Analysis of Public Opinion, which found that only 23% of the people questioned felt that their lives had improved for the better under perestroika and that 53% now seriously doubted whether the reforms would ever improve anything.

And with this wave of pessimism is growing another crisis--one of legitimacy for the Communist Party and Gorbachev as its leader. By what right, people are starting to ask, does the Communist Party continue to rule? What justifies its offer to share power rather than compete for it with rival groups? Who has ordained Gorbachev as the leader of reform and blessed his reform plans?

Gorbachev himself acknowledges that the coming year will be “decisive” for his reforms.

“We are at the stage of a historic breakthrough,” he told a recent meeting of students here. “The fate of our society for many decades is being decided.”

The Soviet Union’s multiple crises--political, economic, ideological, ethnic and social--must be quickly resolved, his advisers say, if perestroika is to retain its focus and regain its momentum in the months before the Communist Party congress next October.

“If we are to prepare a program that will carry the nation forward toward the 21st Century, we must deal with these problems from yesterday,” a policy specialist from the party Central Committee said. “And then we will recover our confidence and our will to forge ahead.”

But Gorbachev admitted this month that the outcome, in fact, is very much in doubt.

The changes now seen as necessary are far greater in dimension than first imagined, the Soviet leader said, and they must be broadened and accelerated further.

“At first glance, everything would seem to be quite simple--we live in this society, we know it, everything is clear,” Gorbachev said. “Yet this turned out to be the most difficult task. . . .

“We came to the concept of perestroika as a revolutionary renewal of socialism and of our whole society. . . . We must now look boldly and openly into the future.”

The reforms proposed by Gorbachev are so fundamental, however, that they amount to a redefinition of socialism, and Gorbachev sees this as one of the most important aspects of perestroika.

The consequent break from the political and economic system developed here over seven decades has met with substantial opposition from conservatives in the Communist Party and the government bureaucracy and provoked a sharp debate over the country’s future.

Forced to Compromise

Radicals and conservatives have, as a result, been able to force Gorbachev into frequent compromises that have both slowed the reforms and given them the uncertain character that now compounds the sense of crisis here.

“We do not know really where he stands,” Tatyana Koryagina, a prominent economist, complained this month. “Everything depends on Gorbachev. If he is not with the conservatives, then he ought to explain to the people openly why he has been taking the conservatives’ side.”

The conservatives have the same complaint, however, and warn that Gorbachev’s reforms have cast Soviet society adrift. They, too, want a clear blueprint for the future, one that lays out means and ends, one that defines the scope of the reforms and sets clear limits for them.

Gorbachev, whose whole political style has been characterized as an “ability to seize the moment” and then press ahead, continues to reject these demands for the reform process, although the cost of the resulting uncertainty is high.

“This would mean only a futile attempt to drive this movement of life into some office-bound scheme once again,” he said this month.

“Specific decisions must be based on an analysis of the rapidly changing situation and with due account, first of all, of the requirements and aspirations of the broad masses of people.”

To resolve the country’s economic problems, Gorbachev has placed considerable hope on a new, six-year transitional program that, step by step, will transform the centrally planned and managed Soviet economy into one that operates on the market principles of supply and demand and that will include privately owned businesses and cooperatives competing with state enterprises.

In response to nationalist demands from the country’s constituent republics for greater autonomy and even independence, he is proposing far-reaching negotiations to develop a new constitution with a decentralized, federal system.

He sees the republican elections that begin next month and continue into March as taking the political reforms down to the local level and breaking the party bureaucracy’s monopoly on power there as it has at the national level.

To ease the ideological qualms of conservatives, Gorbachev published on Sunday a lengthy position paper, outlining his philosophy of political change and reiterating the basic directions in which the country should head.

And he is now putting together a series of ad hoc measures, such as increased imports of consumer goods, an anti-crime campaign and greater attention to worker complaints, that he hopes will restore some of the lost confidence.

“Our forward movement may be too slow unless we manage drastically to improve the psychological climate in the country,” said Kommunist deputy editor Latsis, who is a leading Soviet economist. “The people must fully understand the complexity of the situation, and we must take a fresh look at things.”

But Stanislav S. Shatalin, another leading economist, warned Monday that reforms in the Soviet Union have tended to stall and then collapse--a pattern that may be repeated this year.

The country’s continued economic decline--growth might come to only 1% this year--will not be arrested easily, he said, and momentum must be regained.

“Economic reforms have a history of failure in our country,” Shatalin said. “All the reforms launched since 1965 have failed. This is because they have been isolated from reform of the political system, but we have corrected this. They had also failed to establish a new relationship between property and ownership, and we are correcting this.

“But I do not know whether we have that critical mass of people ready and able and wanting to put the reforms into effect. That is a major question and a key to whether we succeed or fail.”