Perestroika in the USSR and China

Abstract

Recent leaders of the USSR and China saw the inherited Stalinist blueprint as defective for managing state enterprises. To remedy enterprise inefficiencies, various reforms were begun. Review of the Soviet and Chinese prereform economic designs indicates that the misuse of resources was prompted by unconditional state support of enterprises coupled with guaranteed employment and flawed incentive criteria. Perestroika plans in both countries were directly aimed at undoing these relationships. Leaders' expectations of soaring inflation and mounting unemployment, however, have put the restructuring plans on hold. It seems that Soviet and Chinese citizens want the gains of reform without the pains, but neither nation's economy is likely to fulfill that wish. Drawing on the Soviet and Chinese experience, some guidelines for U.S. firms' renewal efforts are suggested. Secure employment was not the culprit in the command economies. Indeed, job security offers U.S. companies substantial advantages. And in the Soviet and Chinese experience, it can be seen that organizational reward systems may foster or hinder productivity gains. It is concluded that job security, when meshed with some form of profit sharing, provides the necessary situational context for members' support of productivity and quality improvement programs.