500 Days Program
By 1990, the need for reforms in the crisis-ridden Soviet economy was evident. Empty shelves, long queues, and ration cards were visual proof of these problems. By 1990, the Soviet Union was burdened with a myriad of economic, administrative, and even purely psychological issues, leading to a deep economic crisis. It was clear that these problems, accumulated over decades, could not be solved with a stroke of a pen. Therefore, the focus was placed on a phased approach to overcome the crisis. One of the proposed solutions was the "500 Days Program".
§ The main points of the "500 days program"
§ The launching of the project
§ The Background
The severe economic crisis of the late 1980s prompted the search for ways to reform the Soviet economy. The situation is vividly illustrated by the sales statistics of food products published in the Soviet journal "Questions of Economics" ("Voprosy Ekonomiki") in 1990.
| Food | 1985 | 1988 | January-June 1989 |
|---|---|---|---|
| Number of products monitored | 179 | 221 | 221 |
The percentage of goods which are not in short supply (deficit) | 28 (16%) | 24 (11%) | 12 (5%) |
In 1985, out of 179 goods, only 28 (16%) were sold without disruptions. In 1988, out of 221 goods, only 24 (11%) were sold without disruptions. In January-June 1989, out of 221 goods, only 12 (5%) were sold without disruptions. As seen from the table, in the first half of 1989, only 5% of food products could be purchased without disruptions. The situation was similarly critical in other categories of goods. For instance, in the "fabrics-clothes-shoes" category, only 12% of goods could be freely purchased. 1 . Moreover, the problem of shortages was intensifying. Products that were relatively easily available in 1987, such as cleaning supplies and pencils, were now part of the deficit. 2
In 1989, the GKER (State Commission for Economic Reform) was established by the decision of the First Congress of People's Deputies of the USSR. The Commission included prominent economists of that time, such as A. Aganbegyan, S. Shatalin, V. Martynov, R. Yevstingevev, among others. Grigory Yavlinsky, who previously headed a department in the State Labor Committee, was also involved in the Commission's work.
A quite significant point, Abalkin writes that on the large long table for meetings, he placed the tablets with Lenin's quote from a report at the IV Congress of the Communist International. So ... the scientists, who were looking for a way to escape from the problems of the planned economy held their discussions next to Lenin's phrases, that was quite symptomatic.
Nevertheless, the group of experts was assembled and the process of preparing programs and proposals has begun. One of these programs was the so-called "500 days program" of Shatalin-Yavlinsky. It should be said that since 1988 Academician Shatalin was familiar with Gorbachev and was his advisor.
Another strong project was the so-called Abalkin-Ryzhkov program, named after the economist Lev Abalkin and the USSR Prime Minister Nikolai Ryzhkov, who actively supported it. Thus, competition developed between two main economic programs: Abalkina-Ryzhkov (more conservative) and Yavlinsky-Shatalin (more reformist). This phenomenon has received the name in history - "the war of programs". The official start to the program was given on July 27, 1990, when Mikhail Gorbachev and Boris Yeltsin signed a joint instruction to develop a "500 days program". In this case, the mix of the Gorbachev's reformist attitude and the popularity of Yeltsin was very useful for that project.
§ The main points of the "500 days program"
First and foremost, it should be noted that the title "Program 500 Days" was not official. The official title of the document was "Transition to the Market: Concept and Program." The specification of a certain number of days was later added as a kind of marker. Next, it is important to focus on the provisions of this program and what it proposed.
✔ The transition to a market-oriented economy as the main vector of the reform. The economic content of the proposed program aimed at creating the foundations of a society with a new economic system. In turn, the market economy was expected to create strong incentives for personal fulfillment and thereby accelerate economic development.
✔ Privatization and the establishment of private property rights. In the Soviet Union, almost everything belonged to the state, so the program envisioned privatizing state assets. The voluntary nature of privatization was emphasized, allowing different forms of ownership transition, such as leasing or purchasing on credit, to enable broader participation beyond those with large financial resources. The wide-scale privatization was seen as a form of social justice, a way to "secure the rights of individuals to their share in the national wealth of the country".
It is clear that in order to sell something, you need to at least roughly estimate the value of what is being sold. Accordingly, the sale of state property required a well-conducted inventory process. The program stipulated how the inventory was to be carried out and which authorities were to be carried out. Local Councils were aimed to play a key role in the assessment process.
✔ The legal basis for business activity. Business has to be decriminalized. The equality of rights of participants in economic activity has to be guaranteed. After contacting the State Property Fund, labor collectives have the opportunity to transfer their enterprise from state ownership to private ownership.
✔ Free pricing. Unlike previous attempts to reform the economy, Shatalin's program offered a full-fledged transition to a market economy. By 1990, it became clear that even regulated price increases still did not fill the store shelves. Those, there was no free pricing mechanism in the Soviet Union (so-called "Marshall scissors" term in economy). There is no motivation to increase the amount of production. Also, it was declared that the "free prices" will start from less socially significant goods to more significant (essential goods).
✔ Overcoming the monopolism.According to the State Supplies of the USSR Committee, the share of monopoly production in mechanical engineering was 80%. And in some types of products (for example, household air conditioners) it was 100%. That means, that all products of this type were produced at the same plant. There is no doubt that there was no competition in such conditions. Any "competitive advantages" were useless. The Shatalin-Yavlinsky program pinned their hopes on a new class of enterprise owners who, as a result of competition among themselves, would produce cheaper and better quality products. From a legal point of view, the point of monopolies had to be regulated by the law "On the Fundamentals of Antimonopoly Legislation in the USSR", which was proposed to be adopted before January 1, 1991.
✔ Economic rights of the Republics and the Union Center This item was perhaps the weakest vulnerability of the program ... Due to the unfolding political contradictions between the Republics and the Center, the issue of powers and competencies was extremely controversial. In addition, the constantly changing situation (declarations of independence, election of new authorities, etc.) made even the most detailed scenario irrelevant for a short period of time. The program assigned the republics responsibility for the situation on their territory.
As for the Soviet Union Central Authorities, it has to: 1) act within the "frames" delegated by the Sovet Republics Local Authorities; 2) manage the Soviet Union Central Authorities Property 3) To ensure consistency in the course of reforms. At the same time, the market economy was supposed to be the most optimal foundation for the "renewed reunification of the Soviet Republics"
§ The Stages
It was proposed to make the changes step by step. There are 4 steps in total:
I) The first 100 days: October 1, 1990 - early 1991 - days of emergency measures. Mass privatization of state property objects. Changes in legislation, incl. exclusion from criminal and administrative legislation of articles providing for punishment for entrepreneurial activity. Aid (except for humanitarian aid) to foreign states is reduced by at least 75%. At the same time, efforts are being made to partially sell the debts of other USSR countries on the world market. The Stock Exchange is to open in Moscow in November 1990.
II) 100th - 250th days: liberalization of prices and active continuation of the process of privatization of the economy. The process of denationalization should be especially active in the spheres of public catering and public services. At the same time, the market infrastructure is actively developing (i.e. exchanges, banks, financial institutions, etc.). The abolition of price controls should lead to the appearance of a large number of goods on the free sale, prices for which will be higher than the state ones, but lower than on the black market.
III) 250th - 400th days: stabilization, continuation of the denationalization process, antimonopoly policy is activated. By the 400th day, up to 30-40 percent of fixed assets of industry, up to 50 percent of assets in construction and road transport, at least 60 percent of trade, public catering, and consumer services should be privatized from state property. In addition, by the 400th day, state control should be removed from 70-80% of goods and services. The ruble becomes convertible.
IV)400th - 500th days: the beginning of an economic recovery, already based on market mechanisms. At this stage, internal competition begins to develop, including with foreign manufacturers. At the same time, customs tariffs protect the young Russian manufacturer. A labor market is being created, and the institution of registration is abolished. As for the financial sector, there is a tax on income from securities and from transactions with them.
Obviously, all the listed active reforms needed some support from the state, which was also spelled out by the drafters. First of all, the state order continued to perform the regulatory function. This seemingly receding economic lever was supposed to play a stabilizing role in the transition to a new economy. However, now the government order had to be carried out on the basis of the contract price.
On the one hand, the state order protected the enterprises accustomed to working according to such a scheme from downtime, but at the same time the negotiated price introduced a market culture of relations. The State Contract System was supposed to deal with the placement of government orders and the drafting of contracts. Thus, it is clear that the state still retained the key levers of economic management.
A certain financial insurance of enterprises was also envisaged with the help of special stabilization funds. The sources of funds for these "money-boxes" were supposed to be targeted budget allocations, proceeds from the sale of bonds, organized by them lotteries. It was assumed that such funds would consider applications from state-owned enterprises on certain conditions. Those. financial support should not have been received by everyone in a row, but those who formulate "well-grounded requests" and will be really affected by the transition to a new economic system. In addition, it was supposed to encourage "at all levels" to create a market infrastructure by entrepreneurs. the new mobile economy required new warehouses, bases, etc.
Until January 1, 1991, the Law "On the Foundations of Antimonopoly Legislation in the USSR" was to be adopted, which would define the features of unfair competition and, accordingly, would set clear rules of the game in terms of fair commercial rivalry.
It is clear that all these "measures", "assistance" and "support" required serious investments in the Union budget. It was supposed to be partially replenished at the expense of the All-Union Federal Tax + 80% reduction in aid to other states. (The USSR actively sponsored the communist parties in different countries of the world, supplied friendly states with weapons) + an annual moratorium on the adoption of new budget programs worth more than 100 million rubles. + reduction of budget expenditures recognized as ineffective.
§ The launching of the project
On September 3, 1990, the deputies of the Supreme Soviet of the RSFSR began to get acquainted with the program . As a result, the Shatalin-Yavlinsky program was adopted by the Supreme Soviet of the RSFSR on September 11, 1990, but its progress was stopped at the Union level. An idea arose to combine the 500 day program with the Abalkin-Ryzhkov program, but this eroded any specifics. Yavlinsky formulated the impossibility of such integration with the phrase "you cannot cross a snake and a hedgehog," after which he resigned.
In his autobiographical book "Life and Reforms", Mikhail Gorbachev assesses these programs not only from an economic but also from a political point of view. He supposed that the Abalkin-Ryzhkov program proceeded not only from the economic union between the republics, but also from the preservation of a single Union state with regulatory functions The Shatalin-Yavlinsky program, recognizing the need for an economic Union of the republics, left out of brackets the very problem of preserving their political Union" .
Perhaps, the Soviet leadership subconsciously or rationally felt a threat in this project. In the end, the reluctance to "stay behind the brackets" of future economic changes likely tilted the scales against this program at the leadership level of the USSR
Just over a year later, many of the points of this program would be implemented by the team of economists led by Yegor Gaidar. The time for decisive measures would probably come after the complete discrediting of attempts to solve deep-seated problems with half-measures. Of course, the question remains open as to whether the essentially saved year could have made the reforms less painful. The situation in 1990, though bad, was still better than the situation that arose by the autumn of 1991 (in 1990, economic decline: 2%, in 1991, already 9%), and as we know, the implementation of economic reforms requires a certain level of controllability of the system, the trust of citizens, etc.
The question of what should have been the starting point for the transition to the market economy also remains open to debate: price liberalization or privatization? In 1992, under Yegor Gaidar's reforms, price liberalization became the primary focus, while privatization was implemented later, whereas in the Shatalin-Yavlinsky project, privatization was supposed to be carried out in the first stage, with price liberalization in the second. Since lifting price controls in the absence of mass ownership could lead to a longer process of forming market prices. In other words, the debate on whether the "500 Days Program" was a missed opportunity or an unrealizable utopia will be continued.
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1 Voronov A. On the problems of overcoming the deficit and methods of regulating the consumer market // "Questions of Economics" ("Voprosy Ekonomiki") No. 1 (1990) page 26
2 Voronov A. On the problems of overcoming the deficit and methods of regulation of the consumer market // "Questions of Economics" ("Voprosy Ekonomiki") No. 1 (1990) page 27