Attempts at Economic Reform

Economic reforms

Rationalisation

500 day programme

Transformation

Reform - Gorbachev’s three phases

Rationalisation

Also known as acceleration, programme of modernisation and investment

Failure of Acceleration

failed because borrowing money from Western governments led to a huge rise in the national debt.

This led to inflation.

Investment in energy did not have the desired effect.

continuation of andropov’s anti-alcohol campaign

as the state cut alcohol production, people began buying alcohol illegally.

Alcohol revenues fell by 67 million roubles, and as such, the burden of the alcohol ban became too great.

500 day programme

Gorbachev and Yeltsin's programme in 1990 was designed to transition the economy rapidly to a market model

Gorbachev ended up turning away from the programme after criticism from hard-line Communists.

500 day programme failures

January 1991: Supreme Soviet introduced private property.

Further reforms allowed ownership of stocks and shares.

The reforms continued to fail. Production of oil fell 9%, while steel production fell 12%.

The government was effectively bankrupt by 1991.

Transformation

Market reforms led to economic chaos. They fell through the gap between a socialist planned economy and a true free market alternative.

Transformation failures

Shortages of essential goods became more and more severe.

Distribution of goods such as grain became ever more tricky.

GDP fell 4% from 1986-90. This led to a drop in approval ratings among politicians. Many were enriching themselves through buying privatised companies.

Law on Individual Economic Activity

It became legal to take on side jobs in the ‘second’ economy not controlled by the state.

November 1986

Law on State Enterprises

power was distributed from central government administration to factory managers

Prices were now set at the local level

june 1987

Law on Co-Operatives

became legal to set up large co-operatives. In practice, these were private corporations.

may 1988

Gorbachev’s three phases of reform

Rationalisation: Gorbachev tried to make improvements to the existing state-controlled command economy.

Reform: Gorbachev tried to introduce some free market measures into the existing economic structure. He wanted a hybrid of socialism and capitalism.

Transformation: Gorbachev abandoned the state-controlled command economy entirely.

Historical views on Gorbachev's role in the collapse of the USSR

the economy would have collapsed regardless of Gorbachev’s interventions. His attempts may have simply hastened the process.

The mistake he made was that he attempted both economic and political reform at the same time. In doing so, he allowed citizens to protest when the economy failed. This led to the fall of the regime.

Historical views on the impact of Gorbachev's reforms

the policies failed because they did not fit with the existing institutions and approaches

Gorbachev was constantly modifying his approach, so his policies had no time to mature.

the system was too weak anyway for Gorbachev’s policies to succeed.