Perestroika in the Soviet Union is a revolutionary renewal of the whole of Soviet society. It is not confined to economic change. footnote1 That is, of course, my special interest as an economist, but the economic restructuring that has already begun cannot be separated from all the other aspects of perestroika. We plan to step up the pace of growth in the economy, but this cannot be separated from the process of democratization and of what we call glasnost, a greater openness in all aspects of government and social organization. The economic changes which are taking place are all based on a re-examination of Soviet history, of the successes and the failures, the periods of reform and growth as well as of degeneracy and stagnation, not forgetting a proper appreciation of the appalling destruction of two world wars and the heroic struggle of the Soviet people to survive and rebuild their shattered lives.

There are two main reasons for the Soviet Union’s adoption of the economic policies of perestroika.

First, the growth of the Soviet economy had markedly slowed down in the last two decades as the following table reveals:

These are official figures which do not show the increase in prices. When these are taken into account with the 4 per cent increase in population, there was, in fact, no growth per capita over the last five year period, but rather stagnation in the economy. In 40 per cent of industrial sectors production actually declined and this included agriculture and transport. The standard of living of two-thirds of the population began to fall. Stagnation was leading to crisis. A total perestroika was the only response we could make.

Secondly, there are deeper roots beneath this. Economic decline did not occur by chance but reflected a more general process. The fundamental issue was that the basic administrative method of managing the economy no longer corresponded to the needs of the country. The old policies did not reflect the new social circumstances. There was a conflict of old forms and current actual needs. Perestroika was needed, therefore, to overcome that mismatch—a profound transformation of society; not an evolutionary improvement, but a revolutionary, qualitative shift of a most complex nature involving all aspects of society.

The economic aspect of the perestroika in the Soviet Union is proceeding in three ways. The first is the strengthening of the orientation of the economy towards social needs.

The standard of living of the people has been falling behind the country’s industrial capacity. Priority has in the past been given to heavy industry; social needs have received only what was left over. The proportion of resources allocated to social needs is now to be increased. It will receive priority and not, as in the past, just be a residuum. That is the principal point. We may take particular examples from Housing, Food Supply, Health and Education.