Gorbachev and Perestroika (Edexcel A-Level History): Revision Notes

Gorbachev and Perestroika

Introduction to perestroika

Perestroika means 'restructuring' in Russian. This term described Mikhail Gorbachev's sweeping economic and political reforms that were implemented between 1985 and 1991. Gorbachev's approach to reform changed dramatically over this period. He began by trying to modernise the existing Soviet system, then attempted to blend market forces with central planning, and finally abandoned the centrally planned economy altogether in favour of a free market system.

However, these reforms consistently failed to achieve economic growth. In fact, under Gorbachev's leadership, the Soviet economy not only stopped growing but actually began to shrink. By 1985, the Soviet Union was facing a serious economic crisis, lagging behind Western economies and even being overtaken by developing Asian countries. Gorbachev recognised this stagnation and committed himself to economic reform, though without a clear blueprint for success.

Mikhail Gorbachev: background and aims

Mikhail Gorbachev (1931–) became the last leader of the Soviet Union when he was appointed General Secretary in 1985. His predecessor, Yuri Andropov, had promoted him because he believed Gorbachev possessed talent and dynamism. Like both Andropov and Nikita Khrushchev before him, Gorbachev's fundamental goal was to reform communism to make it more successful and viable.

It is crucial to understand that Gorbachev's policies were designed to save communism, not destroy it. He wanted to revitalise the communist system, making it more efficient and competitive with Western capitalism. However, Gorbachev had no clear master plan. Instead, he improvised and adapted his approach as circumstances changed. This flexibility and willingness to change direction became a defining characteristic of his leadership.

The three stages of perestroika

Historian Richard Sakwa has identified three distinct stages in Gorbachev's perestroika programme, each representing a deepening of reform and a move further away from traditional Soviet economic structures.

Rationalisation (1985–86)

The first stage focused on uskorenie, which means 'acceleration'. During this period, Gorbachev attempted to work within the existing communist system. The Communist Party led these reforms, which aimed to stimulate economic modernisation, achieve higher rates of economic growth, and increase production levels. This stage represented the most conservative approach, trying to fix the system from within rather than fundamentally changing it.

Reform (1987–March 1990)

In the second stage, Gorbachev became more radical. He initiated reforms designed to introduce market forces into the Soviet economy, allowing elements of capitalism to operate alongside state planning. Simultaneously, he began political reforms intended to build popular support for greater economic change. This stage represented a significant ideological shift, as it acknowledged that some aspects of capitalism might be necessary for Soviet economic success.

Transformation (March 1990–August 1991)

The final stage marked the most dramatic changes. Gorbachev began abandoning fundamental features of the Soviet system, including single-party rule and the command economy. During this period, the Communist Party lost control of the reform process. Events began to move faster than Gorbachev could manage, and the reforms took on a momentum of their own, ultimately leading to the Soviet Union's dissolution.

Early economic reforms: searching for solutions

The anti-alcohol campaign

Gorbachev's first major initiative continued Andropov's campaign against alcohol consumption. In May 1985, he reduced alcohol production at state-run factories by 50 per cent. Additionally, 55,000 Party members were assigned to a special task force charged with stopping illegal alcohol production.

The policy largely failed to achieve its aims. While moderate drinkers did reduce their alcohol consumption, overall consumption in 1987 was still double that of 1960. Soviet citizens over the age of 15 were still consuming between 15 and 16 litres of alcohol annually, and there were still 4.5 million registered alcoholics.

The campaign created significant unintended consequences. Citizens began drinking samogon, illegally manufactured alcohol, rather than state-produced vodka. This meant the government lost massive amounts of revenue from vodka sales. Government alcohol revenues dropped by 67 billion roubles (equivalent to 9 per cent of GDP), making the Soviet Union's economic problems considerably worse. Recognising this failure, the campaign was abandoned in 1988.

Acceleration (uskorenie)

Acceleration was an economic initiative designed to end stagnation and revitalise Soviet economic growth. It formed the centrepiece of the Twelfth Five-Year Plan (1986–90), which would ultimately prove to be the final such plan in Soviet history. The core strategy involved a huge increase in investment aimed at modernising the Soviet economy and making it more efficient. Gorbachev optimistically predicted that this new investment would generate a 20 per cent increase in industrial production over the following 15 years.

Acceleration failed dramatically, and several factors contributed to this failure. A major problem was the collapse in global oil prices. During the 1970s, the Soviet economy had earned substantial revenue from oil exports to the West. However, oil prices fell from $70 per barrel in 1981 to just $20 per barrel in 1985. As a result, Soviet oil revenues dropped by more than two-thirds.

Combined with the loss of alcohol revenues, the Soviet government found itself with significantly less money from the mid-1980s onwards. Gorbachev responded by financing acceleration through borrowing from Western countries. Government debt rose from $18.1 billion in 1981 to $27.2 billion in 1988. This increasing debt burden created further problems, as more government money had to be spent on interest payments rather than on productive investment or consumer goods.

Rather than leading to economic expansion, acceleration created an economic crisis. The government was trapped in a cycle of increasing debt with no corresponding economic growth to show for it.

Partial market reform: introducing capitalism

Acceleration represented the Soviet government's last serious attempt to save the centrally planned system. From late 1986 onwards, senior Communist officials began to accept that only some degree of market reform could bring about economic recovery. This marked a significant ideological shift within the Communist Party leadership.

Law on Individual Economic Activity (November 1986)

The first tentative step towards market reform was the Law on Individual Economic Activity. This relatively modest reform made it legal for families and individuals to earn money from small-scale private work. Examples included private teaching, repair work, and maintenance jobs. This represented the first legal private enterprise in the Soviet Union since the 1920s, though on a very limited scale.

Law on State Enterprise (1987)

The 1987 Law on State Enterprise was far more radical. It aimed to devolve power from central government to factory management, giving managers more autonomy in running their enterprises. For example, factory managers were now allowed to set the prices for their production, rather than having prices dictated by central planners.

However, this reform failed in two significant ways. Firstly, very little power was actually devolved in practice. Gosplan (the State Planning Committee) found new ways of maintaining central control, undermining the reform's intended purpose. Secondly, the ability to charge higher prices meant that the government had to pay more for goods purchased from factories. This further increased government debt, worsening the fiscal crisis rather than resolving it.

Law on Co-operatives (1988)

The 1988 Law on Co-operatives made it legal to establish large-scale private companies for the first time since the 1920s. By 1990, nearly 200,000 private companies, called co-operatives, had been established across the USSR. Many of these co-operatives were commercially successful. In their first year alone, the turnover of co-operatives increased from 29.2 million roubles to 1.04 billion roubles. Moreover, co-operative members earned between two and three times higher incomes than people employed by state enterprises.

Restricting Gosplan

In addition to these specific laws, Gorbachev increasingly restricted the power of Gosplan, the central planning agency that had controlled the Soviet economy since Stalin's time. Initially, he devolved Gosplan's powers to the governments of individual republics within the USSR. In 1990, Gosplan was finally abolished altogether, marking the end of centralised economic planning in the Soviet Union.

Problems with the partial market

Between 1987 and 1990, Gorbachev's economic reforms created what economists call a partial market or hybrid economy. Gorbachev hoped he could combine the best features of market capitalism with the best features of socialist planning, thereby reviving economic growth. However, this hybrid system could not function properly and instead created greater problems than it solved.

When co-operatives were first established, they could sell goods at market prices of their choosing. However, these free market prices were significantly higher than state-subsidised prices. Consequently, consumers found free market goods expensive and unpopular compared to cheaper state products. The government responded by imposing low prices on the co-operatives through a policy called price capping.

This price capping made production uneconomic for the new co-operatives. They could not charge enough to cover their costs and make a reasonable profit. This created serious problems for the fledgling private sector, undermining one of the key reforms that was supposed to stimulate economic growth.

Economic chaos and political consequences

Partial market reform created economic chaos across the Soviet Union. The reforms undermined and weakened the central planning system, whilst simultaneously failing to create an effective market alternative. As a result, there was no effective mechanism for distributing goods efficiently, and shortages of essential items increased dramatically.

A striking example occurred during 1990 when there were severe food shortages despite adequate production. Although Soviet farms had produced 218 million tons of grain, there was no longer an effective distribution system to get this food to consumers. The state distribution systems had been abolished as part of reforms, but the market system was still underdeveloped and unable to fill the gap. Consequently, food shortages affected the entire Soviet Union.

Measuring the failure: economic statistics

Official figures for the Twelfth Five-Year Plan (1986–90) demonstrated the catastrophic failure of Gorbachev's policies. Government statistics showed that between 1986 and 1990, GDP had shrunk by four per cent. Economists believe the official figures likely underestimate the true extent of the decline. This represented the worst economic performance in Soviet history, worse even than the disruptions of collectivisation or the devastation of the Second World War.

Price rises and their impact

In April 1990, Gorbachev finally cut government subsidies for basic products, allowing prices to rise to more realistic levels. He hoped that reducing subsidies would decrease government spending and allow the economy to stabilise. However, prices increased rapidly, causing severe hardship for ordinary citizens:

Product	Price in January 1990	Price in April 1990
Beef (kilo)	2.00 roubles	7.00 roubles
Pork (kilo)	1.90 roubles	5.30 roubles
Butter (kilo)	3.50 roubles	8.80 roubles
Rye bread (loaf)	0.12 roubles	0.48 roubles
Cotton cloth (metre)	1.12 roubles	3.00 roubles

Transition to a market economy

By 1990, the failure of partial market reform had become undeniable. As a result of this chaos, and due to his growing conviction that market economies were superior to planned economies, Gorbachev accepted the need to abolish the centrally planned system entirely and introduce a full market economy. However, achieving this transition would prove extremely difficult. Gorbachev faced increasing opposition from hardliners within the Communist Party who opposed such radical changes to the Soviet system.

The 500 Day Program

To minimise the economic disruption expected during the transition to a market economy, Gorbachev and Boris Yeltsin (leader of the Russian Republic) commissioned two Soviet economists, Stanislav Shatalin and Grigorri Iavlinskii, to devise a comprehensive transition plan. The result was the 500 Day Programme, published in August 1990.

Shatalin and Iavlinskii proposed widespread privatisation and complete marketisation in less than two years. This ambitious programme would have represented a revolutionary transformation of the Soviet economic system, moving from central planning to free market capitalism in just 500 days.

Gorbachev initially supported these radical proposals. However, under intense pressure from senior hardline communists who feared such rapid change, he backed down. He remained committed to economic transformation in principle, but was persuaded that it should happen at a slower, more gradual pace. This represented a crucial moment when decisive action might have salvaged the situation, but Gorbachev's hesitation and compromise allowed the crisis to deepen.

Reform and collapse in 1991

In January 1991, the Supreme Soviet (the Soviet parliament) introduced private property as an important step towards a free market economy. This represented a fundamental break with communist principles. Soviet citizens could now own land and factories in a way that had been impossible since the 1920s, when Stalin had collectivised agriculture and nationalised industry.

In April 1991, another significant law was passed allowing citizens to trade stocks and shares. This reform was designed to revitalise the economy through the introduction of genuine market forces and capital markets. These were all signs that the Soviet Union was moving rapidly towards capitalism.

However, the economy continued to decline despite these reforms. Oil production fell by 9 per cent, whilst steel production and tractor production both fell by 12 per cent. An official government report stated grimly that the Soviet economy was moving beyond crisis to catastrophe. This language indicated the severity of the situation.

The economic crisis had reached such severity that it contributed directly to the political collapse of the Soviet Union itself. The Communist Party's inability to manage the economy destroyed its legitimacy and undermined support for the continuation of the USSR.