Transformation of the Soviet Economy: Economic Reforms and Structural Crisis

Abstract

This article analyses the current problems of the Soviet economy's reform process. The process of transition to a market economy in the Soviet Union, where an extreme degree of monopoly prevails, has been characterised by declining production and accelerating inflation. The rapid growth of the market sector in the situation of highly distorted and heavily regulated prices, dominance of state enterprises, and unclear property rights, leads to the concentration of entrepreneurial activity mainly in speculative operations involving the redistribution of state property, to the deterioration of the macroeco nomic situation and to the deepening of the structural crisis in the economy. In fact, the growth of the market sector is based mainly on hidden subsidies from the state enterprises.

The failure of four years of economic reforms is due to inappropriate economic policy based on mythical ideas about the market economy. Rapid, radical reforms, including large-scale privatisation on the basis of development of financial intermediates, are of crucial importance in overcoming the further deterioration of the economic situation and in preventing the collapse of the Soviet economy.