For a few days after 30 August 2022 reports from Russia were not dominated by the latest bloodshed in Putin’s criminal war on Ukraine. The death of Mikhail Gorbachev, the last President of the Soviet Union, took us back thirty-five years to a time when Russia was a source of unreservedly good news.
A country which seemed unchanging and unchangeable was awash with reformist optimism and energy. Censorship had been lifted and the Soviet press was full of articles proposing radical solutions to long-hidden social and economic problems. European progressives rushed to Moscow to enjoy the heady atmosphere and try to understand how far and fast change would go.
I counted myself immensely lucky to be appointed the Guardian’s Moscow correspondent in July 1988, a post which gave me a ringside seat for six tumultuous years. A year earlier I had already enjoyed a brief taste of the emerging civil society set in motion by Gorbachev’s policies of perestroika (restructuring) and glasnost (openness) when I joined a delegation to Moscow sponsored by END (European Nuclear Disarmament). For a week we met like-minded Russians, including campaigners against nuclear power stations and activists in a fledgling peace movement, who criticised the official Soviet Peace Committee for only protesting at US cruise missile deployments and its failure to demand the dismantling of comparable Soviet SS20s.
Economic reforms
Gorbachev’s domestic reforms were a mixture of politics and economics. The central motif was a new social contract based on using political liberalisation to improve workers’ morale and win public support for economic reforms. Factory managers were no longer under the tight control of Gosplan, the state planning committee. They were given freedom to dispose of their profits and decide on investment but also had the right to sack workers and improve the pay of others. In an attempt to ensure their acceptance, workers in some plants were allowed to elect managers.
The aim of the reforms was to provide incentives and accountability as well as to improve the quality of the factory’s products by enhancing workers’ pride. Soviet citizens had long complained of the poor quality of basic consumer goods. Gorbachev told a meeting in January 1988, ‘nowhere in the West do they elect directors and foremen. Nowhere in the West do work collectives endorse plans. This is what constitutes our socialist democracy’. Gorbachev also gave a controlled green light to private enterprise. Family members were allowed to set up co-operatives but without the right to employ staff from outside the family. These were in essence small businesses.
The reforms were treated as an unwelcome challenge by many officials. They saw them as a threat to traditional practices. To add to the pressure Moscow sent quality inspectors to 1,500 of the Soviet Union’s largest factories. They had the power to reject goods and deny bonuses to managers. Other officials saw the co-operatives as an opportunity to demand under-the-table payments for giving licenses to the new businesses. The upheaval in labour relations led to a wave of strikes by workers in opposition to sackings or as pressure for higher wages.
At the macroeconomic level Gorbachev’s reforms were equally radical, though — unlike the domestic changes — it was hard to describe them as socialist. He authorised the creation of joint ventures between Soviet and foreign companies to expose Soviet industry to the currents of world technology. There were some restrictive safeguards. Foreigners were allowed no more than 49 per cent of the equity in such ventures, and both the president and chief operating officer of the joint venture had to be Soviet citizens. Profits could only be repatriated out of the Soviet Union under strict conditions.
The West’s opportunism
As the somewhat contradictory wave of reforms developed, along with mounting signs of chaos and resistance, Western governments took a growing interest. While Western socialists watched the Soviet changes with sympathy and some concern, Western corporations and the political elite in Ronald Reagan’s United States, Margaret Thatcher’s Britain and Helmut Kohl’s West Germany began to rub their hands. The prospect of arms control, nuclear de-escalation, and even an end to the Cold War was the main factor which prompted Western leaders to woo and flatter Gorbachev. But, increasingly, they saw an ideological opportunity to break whatever elements of socialism which remained in the Soviet system.
They also saw a chance to gain access to a huge treasure chest of natural resources, Russia’s oil, gas and natural resources. Rightwing and orthodox economists like Jeffrey Sachs travelled to Moscow and contacted Soviet think tanks. The message was simple: to improve economic prosperity Russia’s only path should be a full-fledged switch to capitalist structures. This must involve the privatisation of industry and the creation of a stock exchange. The Westerners pointed out that Russian officials could benefit personally from becoming owners of privatised state assets. Western embassies identified influential Russian economists and ministers and put them in touch with British and US colleagues who parroted the same pro-capitalist ideological message. Yegor Gaidar, who was to become Boris Yeltsin’s Prime Minister while still in his thirties, was invited to the Hoover Institute in California.
Gorbachev was hesitant about switching to a market economy and eliminating state subsidies on the prices of food and consumer goods, as Western advisers recommended. He asked several Moscow economists to draw up plans which could be put to the Soviet parliament for approval. They all involved a programme of gradual change. But by 1991 Gorbachev and his team were unable to focus on these economic issues. The demands for independence from the Baltic republics, the clashes between Armenian and Azerbaijani nationalists, and the irreconcilable split within the Communist party between reactionaries and liberals were taking most of Gorbachev’s time.
Above all, there was the clash with Yeltsin, who was using his power base as President of Russia, to split the elite and supplant Soviet institutions (the army, the KGB and the foreign ministry) with his own loyalists and not those of Gorbachev. Ultimately, the Soviet centre did not hold and Gorbachev was left without a job.
Today, many analysts of Gorbachev’s legacy frequently say he launched reforms which quickly spiralled out of control. That is only true in part. Most of his reforms were deliberately undermined and superseded by Yeltsin and the Western governments who advocated what has become Russia’s capitalist transformation.
