Economy 2 Flashcards
When did Gorbachev launch his proposal for economic perestroika
At the January 1987 Plenum of
the Central Committee
Hopes for perestroika
He hoped that by introducing market
mechanisms and allowing an element of private enterprise the
economy could be revitalised. This would put in place a series of incentives that would encourage production and give greater
flexibility than the central command economy in meeting the
needs of the population.
The encouragement of joint ventures
January 1987- The government allowed foreign firms to establish businesses in the Soviet Union, usually in joint enterprises with the state. Gorbachev hoped
that joint ventures with foreign businesses would open the
USSR to more modern technology.
The Law on State Enterprises
June 1987. This allowed
a loosening of state controls over wages and prices and, as
a consequence, weakened the authority of Gosplan. The law
also allowed an element of election in the choice of managers.
Factories were given the right to produce what they liked once
the targets set by the state had been met.
Co-operatives were legalised
1988- small-scale private enterprises to be established. These
businesses could set their own prices. The result was that a
flourishing sector in cafes, restaurants and small shops quickly
developed.
National income utilised 1981-85 average compared to 1990
3.2 (1981-85), -4.0 (1990)
Industrial production 1981-85 average compared to 1990
3.9 compared to -1.2
Why did the Law on State Enterprises have limited use?
Enterprises were still subject to state interference: the state
decided on the allocation of materials. The principle of devolving some power to managers often depended on the attitude of state bureaucrats, many of whom preferred to keep
tight control to ensure targets were met.
1988 industrial production
6.3
What shows food production was not enough to feed the population
One-fifth of the Soviet Union’s foodstuffs were imported.
Problem with cooperatives being legalised
Products, especially foodstuffs, were diverted from state shops (where prices were low) to co-operatives that charged a much higher price. inflation and stripped state shops of many supplies. Co-operatives were able to shop around for a buyer who would
offer them a good price for their goods. This resulted in deals
being concluded with richer city authorities, leaving poorer
cities devoid of adequate food and other basic products.
Another negative of cooperatives
The co-operatives proved to be more productive than the state sector so they attracted the attention of corrupt government officials who demanded bribes for permission to continue to operate. Criminal gangs also saw the potential to exact money through extortion rackets. (These gangs had
become powerful due to them seizing the opportunity to make
illegal alcohol under Gorbachev’ anti-alcohol campaign).
What did hoarding due to uncertainty lead to
Food rationing- In 1988, meat was rationed in 26 out of the 55 regions*
of Russia.
One success of perestroika regarding law on state enterprises
Urban wages rose by nine
percent in 1988 and 13 percent in 1989. But shops empty of things to buy
Why was encouragement of joint ventures limited
Foreign companies keen to invest in the USSR were faced with
endless bureaucracy that made progress slow. Sometimes it put
off potential investors completely. By the end of 1990, there were
nearly 3,000 joint foreign ventures in the USSR, but most of these
were small-scale operations that had little impact on the economy.
