The Brookings Institution, 1775 Massachusetts Avenue NW. Washington. DC 20036-2188 • 1988 • 100 pages * $8.95 paper
During the “blockbuster” film summer of 1989, there was one particularly astonishing film shown on American screens called Little Vera. Unlike such mythical and adventurous films as Batman and Indiana Jones, this film showed the stark reality of life in the contemporary Soviet Union, replete with alcoholism, boredom, and air pollution. But what made the film especially remarkable was the fact that it was produced in the Soviet Union by Russian film makers—strong testimony to the success of Mikhail Gorbachev’s policy of glasnost (openness).
Yet the film makes one wonder if the other element of Gorbachev’s reforms, perestroika (restructuring), has any chance of success. Furthermore, how should we Americans react to the dramatic changes that are now being promoted in the land we have long thought of as our archenemy?
These two questions are the subject of this fine little book by Jerry Hough, a professor of political science at Duke University. Hough has read widely in current Soviet publications and conducted numerous personal interviews, so he is both well informed and able to provide some unique insights.
After taking a brief look at the present situation regarding the Soviet Union and its relationship to the outer world, Hough examines internal forces both retarding and promoting perestroika. In the third chapter, he details the steps Gorbachev has taken over the past decade or so to obtain and consolidate his power. So extensive have been his efforts and so wide-ranging his success, involving both the Politburo and the ruling Central Committee, that one is left strongly persuaded to share Hough’s conviction that Gorbachev is not a man we can lightly dismiss. Hough then examines relations between the Soviet Union and the rest of the world, first explaining the new foreign economic policy and then considering how both American business people and our government should respond.
In Hough’s view, perhaps the greatest fault of the Soviet economy—and yet the one least recog-nized-is its policy of economic protectionism. As Hough points out, this policy does not involve the simple tariffs and quotas which nations such as the United States use to deter foreign trade; rather, the Soviet government monopolizes and restricts all trade. This bent toward autarky is a legacy of Lenin, reinforced by the anti-Western attitude of Stalin and his men. As a result, Soviet producers lacked the benefit of foreign competition; in Hough’s words, “protectionist policies are as disastrous for economic performance in the East as in the West.”
Soviet economists recognize the problem. Hough quotes one of them, Anatolii Dinkevitch, as stating that “economic autarky is, as history shows, a course without a future.” But can the Soviet economy change? Will bureaucrats, content in their positions of power and perquisites, permit it? Even more important, will the Soviet people challenge change?
Although, as Hough notes, Marx is part of the panorama of Western ideas which many Soviet leaders spurn, it is Marx’s view of capitalism that has held the Soviet economy in thrall. Readers familiar with Marx’s works know that he particularly condemned capitalism for two alleged failings: first, because capital accumulation supposedly destroyed jobs and created a “reserve army” of unemployed; and second, the standard of living for workers supposedly was pressed down to the subsistence level by capitalist greed. To overcome these presumed flaws, the Soviet rulers have assured jobs for all workers and have subsidized the costs of food, housing, medicine, and other basic needs.
If the Soviet economy in its drive for efficiency does actually become more capitalistic, then workers must face the prospect of losing their jobs if they are not up to snuff or if market conditions change. And at least initially, the prices of food and shelter will have to rise to approach their true costs of production. So resistance is likely.
But Hough points out that Gorbachev is handling this resistance in adroit fashion. That’s where glasnost fits in: the Soviet people have more freedom of expression and movement, so perhaps they will be willing to tolerate some measure of economic insecurity. (Alas, this is a lesson the Chinese Communist leaders haven’t learned. While it had appeared that reform of the Chinese economy was outstripping that of the Soviet Union, the Chinese regime has refused to grant other freedoms. The frustrations of the Chinese people and the determination of the rulers met head-on in Tiananmen Square last spring; the Beijing massacre was the tragic result.)
If economic reform does occur in the Soviet Union and the cold war continues to thaw, how should we react? As for business people considering joint ventures in the Soviet Union, Hough argues that they need have little to fear regarding expropriation, since that would be counter-productive for the reform efforts. But there is still a lot of uncertainty and red tape to deal with. Yet Hough argues that there will be at least some American producers so anxious to serve the vast Soviet market and so eager to gain a foothold from which to make future ventures that they will be willing to overcome such obstacles.
Should we permit them to do so? Hough notes that in recent years we have learned that “government control and regulation are not necessarily the answer to every problem,” so there has been a trend toward domestic deregulation. He suggests that such an approach is just as applicable to foreign as it is to domestic policy. He notes that economic sanctions and embargoes against foreign countries have usually “accomplished nothing productive”: Castro’s Cuba is surely witness to that statement.
Perhaps Hough best captures what he believes should be our approach to perestroika by mentioning a story by Aesop which is as charming as Little Vera is chilling. The story involves a contest between the North Wind and the Sun to see who could get a man to remove his coat. “The North Wind blew and blew, and the man clutched his coat more tightly around himself. The Sun simply came out from behind a cloud—and won, for the man took off his coat by himself.”
Hough believes that American firms operating in the Soviet Union will provide irresistible evidence of the superiority of our system. More than anything else, the examples we furnish might assure the success of perestroika.
Professor Shannon teaches in the Economics Department at Clemson University.