Perestroika

1
Perestroika

• Nicole, Jon, Jerry, Renee, and Jason

2
Introduction

3
Mikhail Gorbachev 1931- Present General
Secretary of the CPSU March 11 1985  August 24
1991
4
Early years

• Born March 2nd 1931 in southwestern Russia near
  Stavropol
• Excelled in school
• Awarded the Order of the Red Banner of Labour in
  1947
• Attended Moscow University to study law in 1950
• Met his future wife, Raisa Maksimovna Titarenko

5
Political Timeline

• 1956 - First Secretary of the Stavropol City
  Komsomol Committee
• 1970 - First Party Secretary of the Stavropol
  Kraikom
• 1971 - Member of the CPSU Central Committee
• 1980 - Received full membership to the Politburo
• 1985 - Elected General Secretary of the Communist
  Party

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Economic Landscape
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Economic Slowdown

• Growth rates of the soviet economy declined
  significantly from the late 50s through the
  mid80s
• The economic slowdown can be attributed to low
  Capital Productivity
• Source The Real National Income of Soviet Russia

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Economic Slowdown

• Output and labor productivity decreased
  dramatically and capital productivity remained
  very low
• In comparison the U.S. output and productivity
  remained relatively constant over time
• Source Russian Soviet Economic Performance
  Structure

9
Economic Slowdown

• Significant decreases in the efficiency of both
  labor and capital
• The economy had become too complex, labor
  discipline was low and poor implementation of
  technology

10
Economic Slowdown

• The ratio of gross hard-currency debt to
  hard-currency earnings was 73 in 1980, and 115
  in 1980
• Soviets imported industrial goods and services to
  support the technological needs of the economy
• Source Handbook of Economic Statistics

11
Agricultural Performance

• Grain Harvest declined despite agricultural
  modernization
• Departure of labor to the urban sector, largely
  unsuccessful capital substitution
• Source USSR Outlook and Situation Report

12
Agricultural Performance

• Output and productivity steadily decreased
• Poor utilization of inputs such as machinery and
  equipment and a primitive system of processing,
  storing and distributing food products
• Source The Soviet Economy Toward the Year 2000

13
Agricultural Trade

• Imported large quantities of grain, and was
  widely seen as a failure of Soviet agriculture
• Grain imports were needed because of the poor
  productivity of the Soviet agricultural sector
• Source USSR Outlook and Situation Report

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Gorbachevs Ideas

• Gorbachev believed that the Soviet Union's
  economic system could not continue without
  reforms
• Called for rapid technological modernization and
  increased worker productivity
• Championed an end to the arms race with the west
• Advocate for anti-alcohol reform

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The Stages of Policies and Reforms
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The Stages of Policies and Reforms

• Phase I Introduction (1985-1986)
• Phase II Policy Development (1986-1988)
• Phase III Implementation (1988-1989)
• Phase IV Collapse (1989-1991)

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Positive Effects

• Development of Free Markets and Free Speech
• Improve Economic System Technology
• Attempt for a Western-styled Open Society

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Negative Effects

• Financial Crisis
• Complete Collapse of Economic System
• Collapse of Government
• Increased Criminal Activity

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Primary laws
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Law of State Enterprises

• Was enacted July 1987.
• Enabled state enterprises to determine their own
  levels of output.
• Was a major step in ending the planned economy.

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Effects of the Law of State Enterprises

• Output levels based on supply and demand
• Enterprises had to fulfill state orders
• Purchased inputs from suppliers
• Self-financing, no bankruptcy safety net
• Enterprise control shifted to elected workers'
  collectives.

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Law of Cooperatives

• Was enacted in May 1988
• Allowed for private ownership of enterprises in
  the services, manufacturing, and foreign-trade
  sectors
• Bolstered the Russian private sector economic
  activity

23
The Effects of the Law of Cooperatives

• Allowed private ownership of business
• Taxes and Employment restrictions
• No size or asset limit imposed
• Joint ventures with foreign companies

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Why Perestroika Failed

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Not a Fully Comprehensive Reform Program

• Internal problems and inconsistencies
• Impossible balance between central control and
  local initiative
• Little faith based on previous reforms
• Enterprises unable to implement new system
• Gorbachevs belief in the potential of Socialism

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Timing and Speed of Reform Introduction

• Contract negotiation had no stable legal system.
• Required a period of declining economic
  achievement
• Hesitation of Gorbachev leading to a very slow
  process

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High Levels of Uncertainty

• No experience with market system
• Bureaucratic resistance to change

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Diminishing Public Support

• Effects of Price liberalization
• Soviet mentality accustomed to price stability
• Gorbachev promised a positive impact that
  citizens were not seeing
• Declining public opinion of Gorbachev

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Why did the Chinese Reforms Succeed?

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Chinese Economy did not Consider Glasnost

• Allowed central Chinese government to remain in
  leadership control
• Political Communism was kept, but economic
  Communism was abandoned
• Tiananmen Square

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China Focused Early Reforms on Agriculture
over Industry

• Allowed small producers freedom to produce what
  they wanted
• Could not occur in Russia due to overwhelming
  state influence

32
Chinese Economy was not Centered Around Large
Enterprise

• Majority of Chinese economy was centered around
  small agricultural enterprises
• Did not have to deal with problems of large
  industry
• Russian economy focuses around heavy industry
• Forced to immediately deal with problems of
  unproductive large enterprises

33
China was able to Attract Foreign Investment

• Many Chinese lived abroad and were able to invest
  cash flows back to mainland China
• Russia kept an Iron Curtain over people living
  abroad
• Limited flow of foreign investment

34
China Video

• http//www.pbs.org/wgbh/commandingheights/shared/v
  ideo/wmp/mini_p02_14_220.html

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• The End