Gorbachev Plans Tough Steps to Rescue Economy

President Mikhail S. Gorbachev, warning that the Soviet Union’s economy is disintegrating and its political structure collapsing, presented a rigorous program Tuesday to pull the country out of its crisis with a forced march to a market economy and tough measures to reassert his own authority.

To rehabilitate the crumbling Soviet economy, Gorbachev outlined as the core of his program measures that would begin the privatization of state enterprises, end subsidies to those losing money, finally free prices from government control and open the country to foreign investment on an unimagined scale.

To manage such a fundamental change, he called for a ban on strikes, political protests and other activities that he said are destabilizing the country. He offered to cooperate with his critics but bluntly warned that he intended to restore, “top to bottom,” the government chain of command and halt the country’s ethnic feuds.

The measures, drawn up by Prime Minister Valentin S. Pavlov, are more severe and far-reaching than any Gorbachev has put forward before. Unlike Gorbachev’s past proposals, they came with lists of 49 new laws, decrees and agreements plus a timetable for their adoption and implementation in the next three to six months.

“We are talking about the danger that is hanging over our country, a danger for our very statehood,” Gorbachev told the Federation Council, the country’s top policy-making body, warning that the Soviet Union is facing a national “catastrophe.”

Finally dealing with a crisis that he and others had discussed for months but had done little about as it deepened, Gorbachev indicated that the government is now ready to implement key reforms. They would include the step-by-step privatization of most of the state-owned, government-run Soviet economy; the withdrawal of subsidies from inefficient factories, farms and mines, and a sizable cutback in arms production.

In virtually its only ideological statement, the Pavlov plan warns in a preamble that “any attempts to turn back (to the previous system of state socialism) will lead to the complete collapse of the entire society.”

What has galvanized Gorbachev and the government is clear: In the first quarter of 1991, the country’s national income dropped at an annual rate of 12%, dangerously approaching the 15% limit at which an economy is thought to be beyond salvage. A key indicator in a socialist economy, national income is the net value of all goods and material services.

Declaring bluntly that “the main task for 1991 is the prevention of chaos and economic disintegration,” the Pavlov program sets out dozens of measures that seek to preserve what is still working in the Soviet Union’s centrally planned economy while accelerating the transition to a market economy based on free enterprise.

Envisioning unemployment that could run into the tens of millions, it calls for a massive government retraining effort, a public works program--and the dispatch of thousands of Soviet workers abroad, where they would earn hard currency and learn new skills.

With agriculture a major priority, the government promises farmers additional funds, more equipment and their own land, free of state control. It also provides for the transfer of workers from unprofitable factories and mines to farms in “new development areas.”

Anticipating major increases in prices--virtually all state controls are to be lifted in the next 18 months--the government promises to protect pensioners, welfare recipients and large families.

Despite a raging controversy over foreign investment, the program calls for extensive “concessions to foreign countries and companies” to speed economic development. And new legislation will apparently allow foreigners to buy state enterprises that are being privatized.

To boost production, enterprises that have been closed in recent years as heavy environmental polluters will be reopened immediately under the program, and they will gradually be cleaned up.

New, emergency budgets will be drawn up immediately for the national and local governments with “maximum reductions of all expenditures,” according to the program.

The ruble, the Soviet currency, will be strengthened by tough tight-money policies, the injection of more consumer goods into the market, the privatization of urban housing, the sale of capital assets ranging from stores and small factories to trucks and buses, and an end to the state monopoly on raw materials.

Income taxes will be cut in the upper brackets to encourage entrepreneurs. The new, and widely condemned, 5% sales tax will be replaced--by a higher, hidden value-added tax.

The political and social costs of such fundamental changes in an economic system still largely unreformed despite his efforts over six years will be staggering, Gorbachev acknowledged, and the new measures, like the sharp increases last week in the prices for food and consumer goods, seem certain to bring more protests.

Viktor K. Grebenshikov of The Times’ Moscow Bureau contributed to this story.