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Reform of Economic Management

"Gorbachev Factor"

The next fateful decision concerned the reform of economic management in general. The traditional system established by Stalin had been based on the political supremacy of the Communist Party. Party bodies played a key role in sorting out problems in relations between enterprises. Depending on the scale of a problem, it was resolved by district, city, regional, or republic party committees. If a problem was of an all-union magnitude, it was placed before the party’s Central Committee. In short, party structures were the “blood vessels” of the command-bureaucratic system, ensuring its smooth operation.  

In the postwar period, as the complexity of the Soviet economy grew, this system became less and less effective. First party secretaries in the regions and even Central Committee officials were often poorly qualified to make important decisions in specialized branches of production.


Gorbachev thought that he could make the economy more efficient by curtailing the interference of the party bureaucracy in economic manage-ment. He announced that the party’s main concern should be ideology and that any intrusion in matters of production should cease.  

In addition to undermining the role of the party bodies as economic mediators, Gorbachev sought to liberalize economic management by dismantling all-union ministries, portrayed as “monsters” of the command-bureaucratic economy. Civil servants, working in economic bureaucracies, were disparaged as parasites who produced nothing and yet had the power to determine economic activity across the entire country from a single center. The result of Gorbachev’s onslaught on the ministries was a speedy dissolution of less important ministries and drastic job cuts in more important ones. In a year, the staff of central ministries was reduced from 1.7 million to 700,000. This was extolled as a triumph of the reformist leadership over the old command system.

However, the drastic weakening of the central ministries only accelerated the disintegration of interregional ties between enterprises. The substantial reduction of the ministries’ functions, as well as the diminished role of the party structures, damaged the “blood vessels” that integrated the economic space of the Soviet Union. Freed from the arbitrary meddling of party officials and the pervasive control of central planners, the Soviet economy, far from being able to revive, began a rapid descend into chaos.

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The Economy in Crisis


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