Latsis: Economic Reform in USSR, page 6

The Consumer Market

The main pillar of economic recovery is the stabilisation of the consumer market. Imports alone cannot do the job: the task is drastically to increase the production of consumer goods domestically. Frankly, it cannot be accomplished in a year or two, although in 1990 consumer goods production will grow by 13.5% (in retail prices) over the 1989 plan target, while GDP will only increase by 2.3%. But I would like to warn against the desire to saturate the market only with clothes, shoes and other everyday goods. The best bet would be new high-tech products, such as videos, household electronics, microwave ovens, etc. The conversion of defence plants, which have the necessary technology and knowhow, to the production of such goods will also help stabilise the market. Civilian products already make up 40% of the output of the defence industry, and the figure will exceed 60% by 1995.

Changes in retail prices were proposed a few years ago. Indeed, prices for many foodstuffs have been the same since 194, and for meat since 1961, although those for manufactures and other goods have increased, of course. Some economists are suggesting that prices should be raised across the board to a level at which supply and demand are balanced on the market. Although in principle prices should be regulated precisely in this manner, the sociopolitical situation today is too precarious for such a step. Many economic problems would be resolved, but the side effects of such price rises are easy to foresee. Also, it would be unfair to make the people pay for the profligacy of our ministries and departments.

The priority is to cope with the excessive demand for production-related goods, artificially inflated due to the incompetence of ministries, superfluous industrial construction, etc. The next step is to balance the consumer market through a reduction in the inflationary financing of the state budget. Then the structure of retail prices can be changed, but only with a socially justified compensation in the form of wage and pension rises. Other socialist countries have already done this.

One of the more frequent questions asked about the Soviet economic reform concerns the relationship between the plan and the market. Are we sacrificing the former to the latter? I think that market relations are impossible without efficient planning. Unfortunately, the market is not yet working in our country in spite of the introduction of cost-accounting and the growing rights of enterprises. As I have said, administrative regulation has been slackened, while that by cost-and-benefit methods, through finances, has not been organised adequately.

Against the gloomy background of the worsening market situation, which has a depressing effect on people, the changes for the better brought about by the economic reform have gone largely unnoticed. Moreover, drastic improvements are hard to make in such a short time.

Until recently housing was one of the more acute social problems. Over the past fifteen years housing construction has grown by less than 0.5% a year. Between 1986 and 1988 alone, housing turned over for tenancy increased by 15%, and 383.6 millions square metres of living space was built. Today, however, the reserves that were on the surface, so to speak, have been exhausted. The task now is to expand the production of building materials in order to sustain a doubling of housing construction over the next few years. Regrettably, the impressive progress here is not ail that visible because of the dimensions of the problem: an Increase of 15% over the 2 million flats that were built every year means an extra 300,000 flats annually, whereas the country's waiting list for new homes is 12 million. When will the last families on the list get new housing? Moreover, 30-40 million more families actually need better housing although they are considered slightly better off than others and have not been put on the waiting list.

Higher growth rates of labour productivity are another achievement of the reform. Several hundred thousand people have been released in material production as a result. But the labour market is still short of 10-15 million pairs of hands, so unemployment is not an immediate threat. Yet in some regions, especially in Central Asia, there is a sizable pool of free labour, which sometimes causes social conflicts.

The consumption of farm produce, especially the products of livestock-breeding, has increased. Milk and meat production has been growing by 34% a year over the past four years. But the increment is not that obvious in the pot.

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