Soviet Market Reform Will Be Put to Voters


The Soviet government, seeking a popular mandate to transform the country’s socialist economy into one based on market forces, announced plans Wednesday for an unprecedented national referendum on sweeping reforms that it acknowledges will double or triple many consumer prices and could put tens of millions of people out of work.

Yuri D. Maslyukov, the first deputy prime minister, said that the government feels it cannot proceed with such major changes in the economic system without firm national support because of the fierce criticism the leaders have already encountered for breaking with socialism and for the harsh impact on most Soviet workers.

“A transition as steep as this one is impossible without a national accord,” Maslyukov told a press conference, arguing that the government sees no way other than a market economy to bring the country out of its deepening crisis. “If the government’s plan is not accepted, then the government should resign.”

Voter approval of the program is far from certain, and the referendum, the first in Soviet history, is probably the boldest political gamble that President Mikhail S. Gorbachev has taken in his five years as the country’s leader. Some of Gorbachev’s most fundamental reforms of the Soviet system will be at stake in the vote, and if the proposal is defeated, his authority will be badly impaired.


Yet, so controversial has the program become that Gorbachev, who has never faced the nation’s electorate, clearly wants the mandate to proceed with the reforms despite opposition from Communist Party conservatives and the misgivings of ordinary workers.

Gorbachev, speaking to members of the Congress of People’s Deputies of Russia, described the reform program as “a major turn . . . equal to the October Revolution” which brought the Bolsheviks to power in 1917.

If the present government fails to win a clear mandate, Maslyukov speculated that, as in Poland last year, there could be “the convocation of a round-table conference of various political forces,” including the emerging opposition parties, to work out a strategy that could command popular support.

Radical reformers have been pressing for such talks to discuss not only present policies but new structures for making political and economic decisions.

But Gennady Yanayev, the chairman of the Central Council of Trade Unions, expressed strong doubts about how effective a referendum on a transition to a market economy would be.

“People discuss the market without even knowing what it is,” Yanayev said. “We know more about space research than we do about market research. A lot of explanation is needed.”

Leonid I. Abalkin, the vice prime minister in charge of economic reform, contended that without a national consensus, as demonstrated by a victory in the planned referendum, the reforms could not proceed, the economic crisis would worsen and perestroika, Gorbachev’s overall reform program, would fail.

“We should not wait for a social explosion--we should ensure that no explosion takes place . . ., " Abalkin said at the government’s press conference. “If we had done this two or three years ago, it would have been far simpler. If we wait longer, we will have to pay a greater price. . . . Either we take this difficult choice or we load it onto the shoulders of our children.”

Nikolai Y. Petrakov, Gorbachev’s top economic adviser, told a Soviet-American trade conference Wednesday that he thinks it is a blunder to defer the start of the plan, including the major price increases, for seven months until Jan. 1.

Petrakov said that announcing price increases so far in advance could cause consumers to buy everything now and prompt businesses to hold back as much as possible.

“This will create a panic, an economic panic,” he said. “I think that we should not lose these seven months.”

The government plans, in fact, to raise some food prices July 1, starting with a threefold increase in bread prices, and to undertake many of the other changes, some of them by decree, before the referendum.

“We can’t wait,” Maslyukov explained, noting that much time had already been lost in debating the reforms.

Although no date has been set for the referendum and there is no existing law on holding a national referendum, it could come soon after the Communist Party congress in July or in early autumn after the vacation season. New laws will also be needed to put the economic reform program into effect, and the Supreme Soviet, the national legislature, is scheduled to reconvene in September to enact the measures.

The government’s program, approved Tuesday by the Presidential Council, the country’s top policy-making body, is to be outlined in full today by Prime Minister Nikolai I. Ryzhkov as virtually the last chance to save the failing economy short of truly drastic measures.

At its core, the program calls for the transformation of the centrally planned Soviet economy, based on state ownership, to a “regulated market economy” governed by supply and demand, increasingly but not totally privatized, more and more managed by entrepreneurs but overseen and regulated by the government.

Among the elements outlined by Maslyukov were the dismemberment of the Soviet Union’s vast infrastructure of industrial ministries, an immediate end to the monopolies enjoyed by many Soviet enterprises, freeing of the State Bank from governmental control and step-by-step measures to make Soviet currency, the ruble, convertible.

Central planning would no longer focus on production quotas, Maslyukov said, but become mostly indirect and indicate general goals in the way that West Germany does in its planning.

The first two years of the reforms, 1991 and 1992, will be the most difficult, he continued, with living standards likely to drop 5% to 6% a year because of the higher prices and likely increase in unemployment.

The program envisions price increases of varying amounts throughout the Soviet economy--energy prices would rise an average of 82%, food prices about 200%, consumer goods 43%--in order to cover actual production costs and to reduce or eliminate the extensive subsidies. Many of the prices have remained unchanged for decades--food, for example, since 1954.

The plan calls for increased pay to compensate for the higher food prices, but it is still uncertain whether the compensation will be full or partial and whether it will come with the increases or lag behind. Eventually wages are expected to rise in accord with a consumer price index.

The program also calls for the sale of some state enterprises to individuals and cooperatives, the leasing of other enterprises to their managers or workers to run on a profit-or-loss basis and the sale of shares in 220,000 industrial enterprises, about 70% of the country’s total, as the first step toward privatizing them. An equities market would be set up to handle the buying and selling of shares.

Massive unemployment could result from the changes, Soviet officials acknowledge, as unprofitable firms are closed--about 30% of Soviet enterprises lose money and a similar number are marginal--and unneeded workers are laid off at firms that are privatized.

As many as 40 million people, about a quarter of the Soviet labor force, might have to find new jobs, Abalkin said, as the economy is restructured. Actual unemployment, which now is estimated at 2 million, could increase to 6 million or 8 million.

Yanayev said that trade unions had demanded, as a condition for their support of the reforms, a government pledge to honor the constitutional guarantee of work for all by offering a job to anyone able and willing to work. They have also insisted on full compensation for any increase in the prices of food and consumer goods, he said, and salaries will be adjusted for the initial increases and then linked to a consumer price index.

The program calls for the creation of a social security system to protect the low-paid, including pensioners, single-parent families, teachers, physicians and government employees.