Soviets Break With Past, OK Private Firms

After an anguished, yearlong debate over a step that many Communists fear as the end of socialism in the Soviet Union, the country’s legislature voted Tuesday to allow private entrepreneurs to own and operate small businesses, even factories, and to hire their own workers.

Members of the Supreme Soviet overwhelmingly approved, 350 to 3 with 11 abstentions, the far-reaching legislation on property ownership that will lay the foundation for a mixed economy, based on state, collective and private enterprise and driven both by market forces and central planning.

Described as the “pivot” of President Mikhail S. Gorbachev’s economic reforms, the legislation breaks the long-held socialist principle of a governmental monopoly in industry based on the theoretical “superiority” of state ownership of the means of production.

The legislation permits Soviet citizens, for the first time since the 1920s, to open a variety of businesses, ranging from garages for automobile repairs and small clothing factories to restaurants and barbershops to farm enterprises, and to employ other people to work for them, subject to state regulations on pay and working conditions.

Of all Gorbachev’s reforms, few have been debated as heatedly and as long as this, for few go as far in redefining the theory and practice of Soviet socialism. Opposition reached through Communist Party ranks into the ruling Politburo and continued throughout the prolonged legislative review.

Leonid I. Abalkin, the government’s deputy prime minister for economic policy, argued, however, that the Soviet Union’s economic crisis is so grave, with industrial production continuing to decline, that urgent steps had to be taken to salvage the whole reform process.

“Either we speed up the reforms or we start shipping things in military transport. . . ,” he told journalists, using a common expression suggesting an economy on war footing. “There is a crisis of confidence--of confidence in the government.”

At present, the Soviet constitution declares that “the foundation of the economic system of the Union of Soviet Socialist Republics is socialist ownership of the means of production.”

The measure still requires a number of constitutional amendments, and they must be adopted by the Congress of People’s Deputies, the national Parliament and the parent body of the Supreme Soviet, before the law goes into effect July 1. The 2,250-member Congress meets next Monday and may consider it then.

No private businesses, aside from people who were self-employed or small groups licensed to operate as cooperatives, have been allowed by law in the Soviet Union since the dictator Josef Stalin banned them in 1931.

After an initial period of nationalization of private businesses, V. I. Lenin, the Bolshevik leader, had not only permitted but encouraged Russian and foreign entrepreneurs under his “New Economic Policy,” which he launched in 1921 to rehabilitate the country’s economy after World War I and the first, harsh years of socialism.

For Lenin, the inclusion of private ownership of the means of production in the socialist economy was a necessary measure, a temporary retreat to ensure the country’s recovery and its political stability and thus the ultimate survival of socialism.

Conservative sentiment against the current move has been strong. Yegor K. Ligachev, the staunchest upholder of traditional Marxism within the Politburo, told a meeting of the party’s policy-making Central Committee last month that he was firmly against the introduction of such private ownership. He urged a national referendum before a decision was made.

Rejecting hard-line criticism of the new law as a break with socialism, Abalkin asserted that the legislation, and the shift in philosophy behind it, was necessary not only for a more prosperous and but a more just society, one that encouraged and rewarded fairly people’s individual as well as collective contributions.

Another key provision of the bill orders state-owned enterprises to allocate a share of after-tax profits to the workers, a practice now of some but not all enterprises.

In giving state workers an assured stake in their firm’s profitability, the government hopes to encourage them to work harder and increase the very low productivity rates.

The law, Abalkin cautioned, was “just a piece of paper” and would not bring an economic turnaround by itself.

“We need to change the stereotypes of behavior and peoples’ psychology,” he said, alluding to the widespread hostility here toward entrepreneurs and others who would try to get ahead.

The Supreme Soviet earlier approved laws on the leasing of state-owned enterprises to their employees, cooperatives or individual businessmen and on the long-term leasing of agricultural land to farmers. Legislation is pending on tax and price reform and other measures in a package of legislation introduced last autumn to transform the Soviet economy.

Although the new ownership law preserves large areas of monopoly for state enterprises, it declares all forms of ownership--state, collective and individual--as equal before the law. It asserts that society benefits from competition among them.

“This represents an enormous step forward because it lays down the principle of pluralism in the forms of ownership and basis of their equality and their protection from the government,” Alexei Yablokov, one of the bill’s supporters, said.

Many compromises were made, however, in order to get the original proposal through the Supreme Soviet. First offered in late 1988 by radical economists, that called for a fully mixed economy with broad private entrepreneurship.

The scope for private businesses was reduced, the size of those enterprises was limited, many state monopolies were preserved and the conditions under which workers could be employed are to be set strictly. Private ownership could not extend to land or natural resources.

Even the evocative phrase “private property,” synonymous here with the worst excesses of 19th-Century capitalism and meanest exploitation of workers, was eliminated, replaced by the bland term, “citizen’s property.” That disappointed liberals who wanted a clearer affirmation of the break with socialist orthodoxy.

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