Historic Soviet Reform Ratified : Economy: Legislative approval signals a turning point from socialism to a market-driven system. ‘Life itself has brought us to the transition,’ Gorbachev says.

President Mikhail S. Gorbachev won legislative approval Friday for his program to transform the Soviet Union’s crisis-ridden economy from a system based on state ownership, central planning and government management to one in which entrepreneurship and market forces will reign.

The change, debated for nearly three years, will be historic--a turning point in the 20th Century--for the Soviet Union will be abandoning the socialism that has defined it politically as well as economically for the last 73 years.

“Life itself has brought us to the transition to the market,” Gorbachev declared, calling on Soviet lawmakers to endorse his program. “We must give back to people their natural sense of being their own master. And only a normal economy, the market, can do that.”

But the transformation will come slowly. In the plan approved Friday by the Supreme Soviet, the country’s legislature, Gorbachev provided for a series of four transitional stages over two years with the expectation that full development of a market economy in the Soviet Union will take at least a decade.

“I presume that everyone understands that achieving a full-blooded market system will take many years,” Gorbachev said, while promising that the changes, though initially hard, would bring a better life for the country’s 290 million people.

In a vote that ended months of political paralysis here, the Supreme Soviet voted 333 to 12, with 34 abstentions, to give final approval to the 66-page program.

“We cannot argue forever,” one radical deputy commented. “We have to pass something and then get to work.”

Gorbachev’s program had been delayed for months by opposition from conservatives within the government and Communist Party leadership because of its break with previous policies. But in the end, it came under the sharpest attack from the left, including the populist leader Boris N. Yeltsin, the president of the Russian Federation, and radical politicians and economists demanding bolder moves.

“What will we achieve with half-measures?” Anatoly A. Sobchak, the mayor of Leningrad, asked. “Just as a question of political dynamics, these proposals are not enough to propel us out of that deadly gravitational field of central planning. . . .

“We have not freed ourselves. We have not escaped. We are still prisoners of all those past mistakes and, indeed, of a new one in this decision,” he argued.

As put forward by Gorbachev, who decided on most of the elements himself and even drafted much of the language, the reform plan is largely a set of guidelines for future presidential decrees and a general timetable for these changes over the next two years.

“These guidelines solve the most difficult task of stabilizing the economy and creating the basic instruments of the market,” Gorbachev said in a low-key, 50-minute address to the Supreme Soviet, explaining how he had wed a cautious government program to a proposal by radical economists that would have established a full market economy within 500 days.

“It is most important to revitalize our finances and stabilize the monetary system, to strengthen the ruble (the Soviet currency) and, on this basis, control inflation, free prices and start the mechanisms of market self-regulation,” Gorbachev said.

By the end of 1992, the program envisions extensive privatization of the industrial and commercial enterprises now owned by the state; widespread private farming, and development of active markets not only for consumer goods but also for capital funds, for labor and for the “means of production,” which under traditional Communist doctrine were always to be state-owned.

“We are entering the initial period,” Leonid I. Abalkin, the vice premier for economic reform, told journalists. “The market is only beginning to be established. We are setting up its infrastructures, training its personnel and so forth. We need a cardinal reconstruction in all areas; we need new patterns of behavior.

“At best, I estimate this may take about 10 years, and possibly it will occupy the life of a generation. But let me say this: The Soviet Union will never have the respect of the civilized world, and its citizens will never have the pride of belonging to it, if it does not create an effective economy, oriented toward the people--and this is not possible without the market.”

The reforms would reverse decades of tight, centralized control of the Soviet economy and gradually bring into play market forces to set prices, to encourage entrepreneurs to decide what to produce and to allocate resources.

Their goal is an end to the worsening shortages of food, consumer goods and housing as well as an economic vigor that will make the Soviet Union--the world’s second-largest economy despite the chronic problems--a major player in international markets.

But the very declaration that the “first country of socialism,” as the Soviet Union had proudly called itself, would now rely upon market forces for economic growth was wrenching psychologically and politically.

“The market is the product of human civilization,” Abalkin said, justifying one of the most fundamental shifts that Gorbachev has engineered in his five years in power. “The market has proved its worth an indispensability over centuries. The thing to remember is that the market does not belong to any political system--it is a common value of mankind.”

The urgent need for action was underscored by the latest economic statistics, released Friday. “The crisis is deepening, with a slump in production and declining efficiency,” the State Statistics Committee said. “The monetary and financial situation is increasingly unbalanced, and consumer prices are skyrocketing.”

According to government figures, the gross national product and labor productivity each dropped 1.5% in the first nine months of this year compared with 1989, while personal incomes were up 14.4%--with less to buy--and measurable inflation stood at more than 9%.

Prime Minister Nikolai I. Ryzhkov, speaking in the debate over the reform program, said “tough and unpopular measures” would be required to break out of the deepening economic crisis and that his government would implement them despite calls for its replacement.

“Implementation of these measures will not bring glory to those who fulfill them,” Ryzhkov said. “But the government is prepared for this because it realizes that the future of our people depends on it. . . .

“To duck responsibility today would mean creating additional difficulties tomorrow, and it could trigger an unpredictable political situation.”

Although the reform will end the state’s long monopoly over all aspects of economic life, Gorbachev’s program has come under fierce attack from radicals for allegedly not going far enough and not moving fast enough.

Ivan S. Silayev, prime minister of the Russian Federation, the largest Soviet republic, affirmed his government’s intention--declared earlier in the week by Yeltsin--to adhere to the “500-Day Plan,” drafted by Stanislav S. Shatalin, one of Gorbachev’s economic advisers, and to proceed with its implementation in November.

This will undoubtedly put Russia into immediate conflict with the central government, Silayev said, almost savoring the likely political and constitutional crisis. “Our program has whole blocks that no one will be able to prevent us from implementing,” he declared.

Gennady I. Filshin, a radical economist appointed to head the Russian government’s planning commission, said: “I understand this as direct confrontation, which is not really needed today. For two months, we have used all our strength to achieve compromises with the national government, and this is our result today--a complete refusal to compromise.”

But even Shatalin, the leading radical, seemed chastened by the prospects of further struggle over the reforms and by the bitter rivalry between Gorbachev and Yeltsin.

“Russia may act alone if it so chooses,” Shatalin said, “but we will never create the market we want. Even such giants as Russia cannot do without little Moldova (formerly Moldavia, one of the 15 Soviet constituent republics). Economically, we can survive only together.”

Shatalin, a member of Gorbachev’s policy-making Presidential Council, acknowledged that he had decided in the end to support Gorbachev in anticipation that this would prove an easier road to reform.

“I like my program better than anyone else’s,” Shatalin told a news conference. “But the situation has changed. . . . Economic life has its own momentum, and you cannot simply roll it back. . . . For me, the important factor is the logic of the 500-day program has been preserved in the reform guidelines.”

Gorbachev, in one of the few dramatic points in the daylong debate, had returned Yeltsin’s sharp criticism, including his prediction that the Gorbachev reforms were “doomed to fail” and would bring a “catastrophe” within a few months.

“Comrade Yeltsin’s assertions are strange, to say the least,” Gorbachev told the lawmakers, noting that many of the criticized elements were also part of Yeltsin’s reform proposals. “I have the impression that the Russian leadership is afraid of difficulties and wants to pass responsibility . . . onto the central organs of power.”

Although he said he shared many of Yeltsin’s concerns about the country’s deteriorating political and economic situation, Gorbachev accused Yeltsin and his government of adding significantly to inflation through its decision to raise wholesale meat prices this month.

Shatalin, whose bold plan Yeltsin still champions, tartly commented: “Political stabilization is a pre-condition. This is a sad fact, but it is a reality. And it is all the more reason to drop these political ambitions and demagoguery.”