Towards a Comprehensive Economic Reform? A Pessi-Optimistic View

Abstract

The radical novelty of the present Soviet reform, initiated by the Gorbachev leadership, is the definite and openly declared intention to abandon the very backbone of the Stalinist model of the planned economy: the sacrosanct system of central ‘breaking-down’ of plan targets and central allocation of material resources in physical terms. One should see this as a major breakthrough in the long history of sharp, sometimes bitter debates on reforming the ‘really existing’ socialist economies that goes back to the mid-1950s. The history of the Hungarian reform, however, shows that departure from the directive planning system does not necessarily mean a change to a market economy, or even to a regulated one. The government does not dictate to companies directly what and how to produce but indirectly — by means of financial regulation (taxes, interest rates), pricing, and crediting — regulates the economic activities of them. The government’s aim is to fulfil the centrally elaborated plans as completely and smoothly as possible by regulating the incomes of the companies. Thus, a direct control is being replaced by an indirect one.