On 8 February 1987, the draft of a ‘Law of the State Enterprise (Association)’ was published for the purposes of discussion and any necessary amendment. The ‘Law’ (as it is referred to hereinafter), the first ever promulgated on the enterprise, was published in its final form on 1 July 1987 and came into force on 1 January 1988. It pointed out that the enterprise should be accorded ‘real economic independence’ on the basis of full profit-and-loss accounting and that it should no longer be hostage to the plan dictates of ministries and higher-level economic organs. The law consisted of 25 articles, divided into three parts. Part I made the Enterprise as the basic unit of the national economy. Part II defined the structure of the association and enterprise. Part III covered the whole spectrum of the production and social activity of the enterprise. The law was proposed that enterprises and associations were responsible for the manufacture of some two-thirds of industrial output would have gone on to the new conditions by 1989. So the investments would be undertaken directly by enterprises. In the finance-credit system, as it had been conducted up to the present, part of the state and enterprise incomes had no commodity cover. “In effect, there was a lack of commodity-monetary balance, which resulted previously in a situation where surplus money from the finance-credit system was directed into the economy, instead of being reabsorbed by the finance-credit system.” The ‘Law’, however, left a number of thorny questions of this facet of democratization unresolved. The apparent lack of the ‘requisite’ progress followed the changes in economic practice. “It also seemed to be that the ‘Law’ was to be supplemented by additional legislation, not merely directives.”
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Evaluation of Sources
There has been much research and analysis done on the Gorbachev’s influence on Soviet Union. However, a book called The Impact of Perestroika on Soviet Law expresses some interesting ideas about Gorbachev’s reform actions. It listed out most of Gorbachev’s policy and mainly focused on how the law changed throughout the perestroika period. This book mainly listed out not only the facts, and also lots of references,. It appears to be valid and well researched. The work is objective because all those evidences used by the editor seem like soundness and reliableility. It is also descriptive and detailed account of Gorbachev’s perestroika action. It provides background information in order to make the reader fully understand all the concepts.
Another excellent source is Gorbachev and Gorbachevism. It goes very deep on analyzing Gorbachev. It gives out a lot of details on each policy that made by Gorbachev, especially on the Law of the State Enterprise. It explains the law in details with many references and evidences. It provides insight into the impact of the Law. It analyzes all the articles in the bill, and comprehends it very well by looking at the bill in many perspectives. It builds up its idea from logical and well-structured order. It doesn’t really have many obvious tendencies, so it can make the readers to think comprehensively.
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D. Analysis
1985, the Soviet Union walked in to the era of Gorbachev. To be honest, Gorbachev’s original objective was good. He considered the situation of the country and understood the weakness of this powerful country. He really wanted to change his country’s condition, so he started to do some reform actions. The Soviet’s economy was nationalizing almost completely when Gorbachev became the leader of the state. It was almost like all the citizens were working for the government but were getting in poor. Gorbachev understood that he had to fix this problem in order to resume his country’s economy. He set up a bill that ensured the state enterprises to determine output levels based on demand from consumers and other enterprises freely. The law provided freedom for all the state enterprises to develop on their self. The government or the party didn’t have as much influence on them anymore. This law was the start of Gorbachev’s continuous policy on establishing private ownership. Unfortunately, it was not very successful.
The law intended to make all the companies to develop on their self, but in result, the enterprises were still under the same condition. Firstly, Gorbachev did abolish the state plan on the development of the enterprise, and he really wanted the economic to ameliorate. But this perestroika movement didn’t have a complete outline. Also, there were many politicians, which didn’t agree with Gorbachev’s reform. Thus, the reform could not be running very efficiently. Secondly, the government still controlled the power of determining prizes and goods, and limiting the amount of import goods. The enterprise still didn’t have the freedom to stock raw materials, make the goods’ price and sell their goods. As mentioned in section B above, “until 1990, 95% of goods and prices were still determined by the government”, so the enterprise couldn’t really rescue them from bankruptcy because they still had many restrictions. Thirdly, after increasing enterprise’s right of self-determine, the company itself did earn more profit but there was lack of supervising. The managers did earn more power through self-determining, but they just used their power to acquire profit for themselves. As section B indicated, they can even increased their own wage. As the result, the amount of money the employers earned was way more than their efforts and position. What happened was that the employers just simply earned more, so they can buy more consumable. But the problem was that the amount of consumable still stayed the same, so what the society needed was way more than it actually provided. This caused the price of commodity gone up and led to inflation. Lastly, another critical problem was that this law was essentially going against communism ideology since it was different from the communist’s belief of “commanding market”. It created an environment, which bred anti-communist forces. Because Gorbachev already betrayed communism himself, so he couldn’t stop other people from criticizing the communist and socialist society. These made the anti-communism forces to develop and centralize. The anti-communism force eventually became a great force and started to make the reform off track. Further more, because the government allowed all the enterprises to self-determined, the country didn’t need to give reinforcement to its enterprises anymore, so many enterprises were endangered because they couldn’t depend on the government anymore. To sum up, this bill eventually caused more troubles upon the society.
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E. Conclusion
The significance of studying the failures of Gorbachev’s perestroika is to remind us to not make the same mistake. We can learn a lot of things from his experiences. What is the reason of his failure? He was thinking to develop his country originally but he ended up with destroying his country. So-called being contrary to what expects. Many researchers despised on Gorbachev’s policy, “it must be said that many of Gorbachev’s policies betrayed a failure to appreciate quite basic economic principles and lacked consistency and coherence.”⁴
The eventual condition of the Soviet Union civilians got worse. “In 1991 the Soviet GDP had declined 17 percent and was declining at an accelerating rate. Overt inflation was becoming a major problem. Between 1990 and 1991, retail prices in the Soviet Union increased 140 percent.” Under the status like this, civilians were facing a lot of critical problems like having lack of foods and clothes. His economic reform movement, like passing the Law of State Enterprise, made the whole economic of the country fell and eventually broke up. It stimulated the process of the final disaggregation of Soviet Union.
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Bibliography
[1] Christian, Schmidt-Häuer. Gorbachev: the Path to power. Great Britain. Redwood Burn Ltd. 1986. Print.
[2] Albert J. Schmidt. The Impact of Perestroika on Soviet law. Netherlands. Martinus Nijhoff Publishers. 1990. Print.
[3] Walter Joyce, Hillel Ticktin and Stephen White. Gorbachev and Gorbachevism. Great Britain and United States of America. Frank Cass and Company Limited. 1989. Print.
[4] Alan Smith. Russia and the World Economy: Problems of Integration. London. Routledge. 1993. Print.
[5]“Russia-Unforeseen Results of Reform The Perestroika Program.” July 1996. .
