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Inside Perestroika: The Future of the Soviet Economy.

By Abel Aganbegyan, Transl. by H. Szamuely, New York: Harper & Row, 1989, Pp. 241, $19.95

YOU HAVE TO GIVE this author credit. He plays the U.S. media like David Oistrakh played the violin. He is truly a wonder and a winner. Gorbachev was right in sending him on tours that combine public relations, fact finding and fund raising. Whether this virtuoso will in fact deliver the goods requested by his boss remains to be seen.

Imagine, if you will, that Martin Feldstein and Michael Boskin take a world tour to extoll the virtues of the Reagan-Bush economic program. They jet around the globe, but spend most of their time in Japan gathering ideas, soliciting business, and making the rounds of factories, stock exchanges, and television studios. Then they return home and expound on what we have done wrong in the past and try to get us to mend our ways. They also write a book or two, which is then translated for Japanese readers with the proceeds going for a U.S. charity.

This is what Abel Aganbegyan is doing for the Soviet economy as he tours the United States and other Western nations. his credentials: Chief advisor to Mikhail Gorbachev; head of the Economic Branch of the Academy of Sciences in the USSR; editor of a respected economic journal; author of articles on econometrics and regional economics. By now he is familiar with both East and West, via lecture tours and visits with the rich, the famous and the less famous. At each stop he delivers the gospel as seen by the "new Moscow" and promises genuine changes. Hedrick Smith, authority on the Soviet Union, calls him the dean of reform-minded economists and Gorbachev's guru.

With these two books plus lectures, television and other public appearances, Aganbegyan clearly has an audience in mind. They are the Kremlinologists in the think tanks and the corporate economists/advisors to the chief executives in large corporations. Through them, he can talk to policymakers and export managers. He needs them all; he is trying to convince us that this time the reform movement is for real. Is it? Yes, I think it is; but it is a far tougher and longer road than he cares to admit. Also, he fails to see the complexity and the political/social infrastructure of a modern market-oriented system. The enthusiastic side of him prefers to ignore the harsh realities.

Admirers and optimists label his ideas in these two books path-breaking. Detractors and pessimists call his recommendations mere tinkering. In my view, the truth lies between the two. These two volumes give us useful insights on certain features of the Soviet economy during the past forty years. Thus, we get good glimpses not just on what occurred on the economic front, but also why and how. The flavor is one of, "Finally it can be told," or, "Here is what happened inside the hallowed halls of the Kremlin and out in the field." The diagnosis of past mistakes is discussed vividly and rings true. Still, it is not even the whole economic picture; there is little on politics and the social situation. To get a more complete assessment, one should read these two volumes along with three others: Gorbachev's own Perestroika,(1) Marshall Goldman's Gorbachev's Challenge,(2) and Anders Aslund's Gorbachev's Struggle for Economic Reform.(3)

The two books, just a year apart, offer two distinct flavors, though there is some repetition. In the 1988 book, Aganbegyan lays out some of the specific trends and statistics on the Soviet economy and offers insights on the meaning of the data in thirteen chapters. It is the more scholarly of the two books, marshalling several figures and tables plus a useful index that proves to be a guide to the author's thought process (Marx is mentioned only twice; Hungary -- which the USSR views as a laboratory -- four times; and incentives several times). In the three parts of the 1989 book, Aganbegyan is giving us details of past mistakes plus a progress report on the economic restructuring until now. He also sketches in some of his latest reform ideas, albeit with fuzzy brush strokes. There is no index, there are no charts and -- as in the other volume -- unfortunately, there are no footnotes or bibliography.

The author is at his best when recounting his own experiences and when citing case studies from specific sectors, such as agriculture, mineral resources, machinery, and transport equipment. His dissection of what has gone wrong and what may be done reveals that he analyzed the situation and that he moved out from behind his desk and "field-tested" some of his ideas. Reports of struggles within the bureaucracy and on the factory floor give us an insider's view. His call for moving away from "diktat" or administrative edicts to "market socialism" will appeal to many readers; the arguments in favor of making a clean break sound persuasive and have "surface validity."

The author is at his weakest when it comes to putting the building blocks of the reform together. We meet with cliches and platitudes; the specific implementation steps are omitted; there is no clear statement on priorities, there is no timetable. Aganbegyan is unable or unwilling to say at what speed and in what order certain necessary changes must come about. He is still wedded to some old values, and he is not capable of thinking about true price reform, floating exchange rates, labor mobility or unemployment.

The 1988 book contains an excellent introduction by Alec Nove, the Scot economist, who literally tears apart many of the key points offered by Aganbegyan, only to apologize in the last paragraph that "these pages are not meant to be purely negative." It would have been a far better book if Aganbegyan had dropped in for long afternoon tea sessions, listened to the Scotsman attempted to incorporate his suggestions prior to publication. For, as Nove puts it, Aganbegyan never comes to grip with an acceptable mix of plan and market, centrally fixed and free market prices, state contracts and other orders. As the headline put it in the August 15, 1989, New York Times: "Soviet economic bureaucrats are not about to fade away." Producers remain in charge after four years of perestroika; the inertia is still tremendous.

Aganbegyan is enthusiastic and claims that even the errors made so far are truly valuable lessons for the long run. But he fails to comprehend the built-in resistance at all levels and, like many of his Western counterparts, cannot resist optimistic forecasts. We intend to, he says: double the existing housing stock by 2000; raise food production during 1986-90 two and a half times; and reduce manual labor from 50 percent to about 17 percent of the total working force. He appears blinded by the promise of scientific and technical progress (referring to it no less than twelve times in the space of two pages in his 1988 book). He also is fascinated by obscure phrases, such as "comprehensive programme" and "norms of economic proportions," which are never explained. The author, the editors and translators should have done a better job.

We are taken inside the South Yakutia coalfields, the Minsk Tractor Factor, the Moscow Region Construction Group and several other mining, manufacturing and farm operations. In these situations, Aganbegyan often offers incisive insights, especially on how top-down planning brought no results at all. In his words: "The main mass of the workers was not affected at all or at least barely affected by the changes." Solution then is bottom-up planning, employee involvement, and worker management, right? Not so quick. Aganbegyan speaks fondly of flexible work rules, incentives for individuals and groups, and the collective contract. Wage reforms are said to be intimately tied to price reforms, which are said to be just around the corner. But hold it! "A well-founded level of remuneration depends on setting the correct price, which we still do not know how to determine, and on correct financial and other arrangements" (p. 164 of the 1988 book).

High hopes are held out by Aganbegyan for self-employment, small cooperatives, incentive systems, and so forth. He recognizes that many of the economic changes must come in the context of democratization. Yet, in the final analysis, he is not able to "come clean" as to what measure of democracy can be put in place. There is a glaring quote of Lenin with which he seems to agree: "Learning to unite the stormy, spring flood-waters of bursting democratism of meetings of the working masses with the iron discipline and unquestioning obedience to the will of one person, the Soviet leadership at work" (emphasis in the original; p. 202 of the 1988 volume). As we just saw in mid-October 1989, Gorbachev, while espousing glasnost, reprimanded reporters and editors, complaining about less-than-flattering opinion polls.

To this reader, in the final analysis, what is most pleasing about Aganbegyan is his outspokenness about the past and his unabashed enthusiasm for the present. You can't help but like the man. But one hopes for a healthier dose of realism. The most disappointing aspect of the two books is the wide gap between economics on the one hand and politics on the other. Reportedly, Aganbegyan was asked not to make political comments. What a pity. We have made the same grievous error in the West, of course, yet it is clear by now that the two cannot be separated. It was a sad day when departments of political economy were broken into political science and economics departments.

One more thought on what is the most unusual omission in the two books. This is the lack of reference to World War II, the Great Patriotic War in which Mother Russia rose to great heights to repel the Nazi invaders. The nation became incredibly strong and resilient; there was unity and cohesiveness; there was productivity; and there were heroic deeds even on the factory floor. That is because a social contract existed and because the leadership inspired the masses. Today, this heroic era lives on in every school in the USSR. Surely, I thought, Aganbegyan would draw on the moral of this story and call for a new social contract to wage the "Crusade for Glasnost and Perestroika." He fails to do so; this seems a puzzling omission.

Aganbegyan, if he is to serve both his boss and the average worker/consumer in his nation, must call for a dedication to reforms, both political and economic. I think it can be done, especially if the USSR follows the path just pioneered by Hungary. Will the changes come about and will they endure this time? In spite of misgivings, I think they will. But it will take three decades, not three years, before the pieces are in place; there will be setbacks. Yet we are truly witnessing the beginning of a "sea change," a massive positive upheaval, one that we in the West never thought would even start. Aganbegyan can take credit for being a pioneering cheerleader.


(1)Mikhail Gorbachev, Perestroika (New York: Harper & Row, 1987) (2)Marshall Goldman, Gorbachev's Challenge (New York: W. Norton, 1987). (3)Anders Aslund, Gorbachev's Struggle for Economic Reform, (Ithaca: Cornell University Press, 1989).
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Author:Gross, Andrew C.
Publication:Business Economics
Article Type:Book Review
Date:Jan 1, 1990
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