GORBACHEV'S DOMESTIC GAMBLES AND INSTABILITY IN THE USSR

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• Collection: General CIA Records
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• Document Page Count: 25
• Document Creation Date: December 23, 2016
• Document Release Date: January 17, 2014
• Sequence Number: 1
• Publication Date: September 1, 1989
• Content Type: REPORT

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Gorbachev's Domestic Gambles
and Instability in the USSR
Li
An Intelligence Assessment
4-2
Secret -
SOV89-10077X
September 1989
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ot,-?r1L-At? Directorate of Secret
Intelligence
TIF 6
Gorbachev's Domestic Gambles
and Instability in the USSR
An Intelligence Assessment
This paper was prepared by Office
of Soviet Analysis. Comments and queries are
welcome and may be directed to the Director of
Soviet Analysis
Reverse Blank Secret
SOV 89-10077X
September 1989
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Key Judgments
Information available
as of 21 September 1989
was used in this report.
Gorbachev's Domestic Gambles
and Instability in the USSR
Gorbachev and other Soviet leaders are concerned about serious future
breakdowns of public order in the USSR. This concern is well justified.
The unrest that has punctuated Gorbachev's rule is not a transient
phenomenon. Conditions are likely to lead in the foreseeable future to
continuing crises and instability on an even larger scale?in the form of
mass demonstrations, strikes, violence, and perhaps even the localized
emergence of parallel centers of power. This instability is most likely to oc-
cur on a regional basis, not nationwide?although overlapping crises and a
linking together of centers of unrest could occur.
Instability in the USSR is not exclusively a product of glasnost, and some
of it is indeed a sign?as Gorbachev asserts?that reforms are taking hold.
But Gorbachev's claim that instability otherwise merely reflects the
surfacing of problems that were latent or repressed under Brezhnev is only
partly true. The current budget deficit and consumption crisis is largely
due to policies Gorbachev himself has pursued since 1985. And the
prospects for further crises and expanded turmoil in the future are
enhanced by key policy gambles he is taking now:
? In the nationality arena, Gorbachev is gambling on defusing ethnic
grievances and achieving a more consensual federative union through
unrestrained dialogue, some concessions to local demands aimed at
eliminating past "mistakes," a constitutionalization of union/republic
and ethnic group rights, and management of ethnic conflict to a
substantial degree through the newly democratized soviets.
? In the economic arena, Gorbachev is gambling that, by putting marketi-
zation on hold through the postponement of price reform, and by
pursuing a short-term "stabilization" program, he can avoid confronta-
tion with the public and reengage in serious economic reform without
steep costs at a later date.
? In the political arena, Gorbachev is gambling that, by transforming the
Communist Party from an instrument of universal political, social, and
economic management into a brain trust and authoritative steering
organ, while empowering popularly elected soviets, he can create a more
effective mechanism for integrating Soviet society and handling social
tensions.
In
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SOV 89-10077X
September 1989
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Gorbachev has no easy choices, and other approaches would not necessarily
be safer or more successful. But these gambles, understandable and even
desirable from a democratic standpoint, are based on questionable premises
and wishful thinking:
? The aspirations of many non-Russians will never be satisfied within the
framework of maximum rights the Soviet leadership could grant union
republics or so-called autonomous ethnic formations within national
republics while still preserving a strong federative USSR. Allowing these
people freedom to protest without being able to redress their basic
grievances is a recipe for escalating crises.
? Because the deficit reduction plan is likely to fall far short of planned tar-
gets and because it is unlikely that supply can catch up with consumer
"needs" without a price-induced change on the demand side, Gorba-
chev's emergency financial "stabilization" program more likely than not
will fail. In the meantime, circumstances for introducing marketization
of the economy will have become even less propitious than they were
when this program was introduced, setting the stage for continued
corruption, protracted economic crisis, and retreat to the old "command-
edict" methods.
? Gorbachev's attempt to reform the Communist Party is based on a
visionary notion of what it could become, and is in practice undermining
its ability to integrate Soviet society before new political institutions are
capable of coping with mounting popular demands unleashed by glasnost
and failing economic performance.
As Gorbachev's various critics correctly contend, his gambles are likely to
generate instability over both the near and the longer term.
The odds are high that labor unrest or ethnic strife will?perhaps even
within the next six months?create strong pressures within the Soviet
leadership to crack down much harder than it has to date. Soviet leaders
have a broad range of instrumentalities they can employ to dampen
instability, ranging from stronger threats, to new restrictions on human
rights, to police intimidation, to imposition of martial law.
Gorbachev has sought to avoid widespread use of
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physical force, probably calculating that the fallout from repression would
endanger his entire program of perestroyka as well as his foreign policy,
while perhaps provoking more serious disorders that could lead to loss of
control. Almost certainly he would be willing to escalate coercion some-
what to maintain order and isolate nationalist or other "extremists," as he
threatened to do in his report on nationality policy to the Central
Committee plenum on 19 September 1989. Yet beyond a certain point,
repression would mean abandonment by Gorbachev of his natural constitu-
ency and his entire political program. he might 25X1
choose to resign rather than assume responsibility for a crackdown
involving a major imposition of martial law. Alternatively, the imposition
of harsh measures could be associated with a coup d'etat or legal removal
of Gorbachev. 25X1
Provided he manages to hold onto power, two outcomes of Gorbachev's rule
are possible, depending on how successfully the economy is marketized. In
both scenarios, Gorbachev's retention of power depends upon avoidance of
acute polarization of political forces and progress in reinstitutionalizing
means of political integration. This process would be reflected in further
democratization of the political order, the emergence of some form of
multiparty competition, and a loosening of the Soviet multinational empire.
If political reform were complemented by effective financial stabilization
and marketization, there might be high instability in the near term (two to
five years), but a course could be set toward long-term (10 to 25 years) so-
cial equilibrium. Without financial stabilization and marketization, on the
contrary, there would be rising instability in the near-to-medium term,
high instability in the long term, and likely movement of the Soviet system
toward revolution, a hard-right takeover, or "Ottomanization"?growing
relative backwardness of the USSR and a piecemeal breakoff of the
national republics.
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Gorbachev's gambles and the centrifugal trends they have set in motion are
already viewed with extreme alarm and anger by many members of the So-
viet political elite. But Gorbachev's major gains in the Politburo at the
September 1989 plenum of the Central Committee demonstrated once
again how difficult it is to translate conservative sentiment in the ranks into
effective opposition to Gorbachev's rule at the top. For the time being, his
power looks secure. If, somehow, a successful challenge were mounted
against him over the next year or so, the most likely outcome would be a
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traditionalist restoration that would attempt to "draw the line" in various
areas?especially with respect to democratization of the party and soviets,
glasnost in the media, the conduct of informal groups, and expression of
"nationalist" views?but would accept the need for significant change,
including reduction in military spending and decentralization of manage-
ment. Unless such a regime chose to move ahead vigorously with marketi-
zation (not impossible, but highly unlikely) it would obtain possible stability
in the near term but suffer high medium- to long-term instability, leading
toward Ottomanization or upheaval from below. If Gorbachev were not
overthrown in the near term, an attempt to turn the clock back would
become more difficult?given the reaction of increasingly well-entrenched
pluralistic forces?and could thus also be nastier, possibly involving the
armed forces and taking on a xenophobic Russian nationalist coloration.
Whether or not Gorbachev retains office, the United States for the
foreseeable future will confront a Soviet leadership that faces endemic
popular unrest and that, on a regional basis at least, will have to employ
emergency measures and increased use of force to retain domestic control.
This instability is likely to preoccupy Moscow for some time to come and?
regardless of other factors?prevent a return to the arsenal state economy
that generated the fundamental military threat to the West in the period
since World War II. Moscow's focus on internal order in the USSR is
likely to accelerate the decay of Communist systems and growth of
regional instability in Eastern Europe, pointing to the need for post-Yalta
arrangements of some kind and confronting the United States with severe
foreign policy and strategic challenges. Instability in the USSR will
increase uncertainty in the West about proper policies to pursue toward
Moscow, reflecting nervousness about Soviet developments but noncha-
lance about defense, and will strain domestic and Alliance decisionmaking.
Domestic policy successes or failures will be the paramount factor
ultimately determining Gorbachev's retention of office, but foreign policy
achievements that allow him to justify further cuts in military spending on
the basis of a reduction in the external "threat" would give him more room
for maneuver. Western actions that could be presented by his opponents as
attempts to "take advantage" of Soviet internal instability could hurt
Gorbachev.
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By putting economic reform on hold and pursuing an inadequate financial
stabilization program, Gorbachev has brought Soviet internal policy to a
fateful crossroads, seriously reducing the chances that his rule?if it
survives?will take the path toward long-term stability. Over the short
haul, there appears to be lack of competence among his advisers in the area
of monetary and fiscal policy. A more fundamental weakness in Gorba-
chev's strategy that will perpetuate instability is its hesitant approach to
marketization and unwillingness to face up to the necessity of real
privatization of ownership of capital stock and land. He and his advisers
need help with economic theory. Reduction of instability over the long haul
requires the steady extension of a law-based private sector.
Harsh repression of labor unrest or of food riots in Russian cities are
certainly contingencies that could require a response from US policymak-
ers. But instability provoked by Gorbachev's gambles is likely to present its
severest challenge to US policymaking through a crackdown in the ethnic
arena?probably not in response to communal violence, but in the context
of a move by Moscow to intervene in Russian-native clashes or to repress
the drive for greater national autonomy. Such a crackdown is most likely in
the Baltic region, but could also come in the Caucasus, Moldavia, or?
down the road?even in the Ukraine.
Gorbachev has said he wants to create a constitutionally structured
federative union, and movement toward such a system would certainly be a
positive development from the US perspective. Gorbachev, however, is not
interested in greasing the skids for dissolution of the USSR, and this is pre-
cisely what acceptance of the more radical Baltic demands would imply.
Unless Gorbachev is prepared to broker a special status for the Baltic
republics, and is able to win necessary political support for such an
arrangement, a direct and violent confrontation between Moscow and the
Baltic peoples seems likely.
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Contents
Page
Key Judgments
111
Scope Note
xi
Introduction
1
Nationality Policy Gamble: Concessions Within Limits
1
Economic Reform Gambles
3
Postponement of Price Reform
3
The Crash Budget Deficit Reduction, Resource Reallocation,
and Consumption Program
4
Selective Structural Reform
5
Political Reform Gambles
6
Transformation of the Communist Party
6
Empowering Democratized Soviets
7
Implications
8
Stability
8
Political Outcomes
10
Implications for the United States
12
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Scope Note
This report offers a broad look at Gorbachev's domestic strategy and its
implications for stability in the USSR. Descriptive sections of the report
take into account the full range of information 25X1
available, especially that dealing with Gorbachev's views, and are consis-
tent with more detailed analysis produced by the Directorate of Intelli-
gence. No systematic attempt is made to source the various judgments
which, in the projective sections of the report, are based?as they are in all
estimative writing?on a combination of extrapolation and logical infer-
ence. 25X1
The report is a speculative paper drafted by a senior analyst in the Office
of Soviet Analysis. In a period of epochal change in the USSR, anticipating
the future is a hazardous undertaking, and the issues dealt with in the
report hardly invite unanimity of judgment. Although there are differences
among analysts on specific issues, the report's conclusions do reflect our
sense of the problems and challenges that confront Gorbachev's revolution
and the general direction in which it is now heading.
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Gorbachev's Domestic Gambles
and Instability in the USSR
Introduction
Despite the increasingly pessimistic tenor of recent
assessments in Moscow of Gorbachev's popularity and
prospects, and rumors of coups or military interven-
tion, his major gains in the Politburo at the Septem-
ber 1989 plenum of the Central Committee demon-
strated once again great tactical political skill in
transforming attacks against his line into movement
forward. For the time being, at least, the future of
perestroyka would appear to be less dependent on
political struggle in the Politburo than on faltering
regime performance.
Many factors will affect this longer term perfor-
mance. A key one, however, is Gorbachev's broad
sense of where he wants the Soviet Union to go and
how he seeks to get there?which is the focus of this
paper. Western analysts disagree over the extent to
which Gorbachev has a set of stable long-term objec-
tives. Like Soviet observers, they are also uncertain
whether Gorbachev's stated objectives are always
necessarily his "real" objectives. The premise of this
paper is that, while his positions have evolved over
time, Gorbachev does have a fairly coherent "vision"
(but not a "blueprint") of the future
The existence
of such a vision does not, of course, preclude tactical
dissembling and ad hoc adjustment to circumstances.
Gorbachev has insisted that the domestic revolution
that he has launched in the USSR?which involves
radically dismantling an existing system of more or
less stable, if stagnant and poorly performing institu-
tions?is the only path open. In fact, perestroyka,
glasnost, and demokratizatsiya were not and are not
the only options open to the Soviet Union: they
represent the ultimate gamble on Gorbachev's part
that a liberal, reformed Communism is possible and
that the destabilization brought by change is contain-
able. While denying his own fundamental responsibil-
ity for instability, Gorbachev has claimed that some
measure of it is a necessary corollary of reform. And,
in fact, instability arising from certain types of change
1
undoubtedly is a sign of progress. Yet glasnost has
accelerated the delegitimization of the present system.
It has irretrievably destroyed the regime's capacity to
use Marxist-Leninist doctrine as an instrument of
political control. And it has weakened popular obedi-
ence to authority.
Gorbachev is now embarked on a set of related
gambles as he seeks to reform ethnic relations, the
economy, and the general political system. These too
are producing crises, on which Gorbachev hopes to
capitalize to provide further momentum for peres-
troyka. From these crises new instability will arise,
with the key questions being: how serious will mani-
festations of this instability be, and what types of
crackdown is it likely to inspire? To call Gorbachev's
choices gambles, of course, does not imply that other
approaches would necessarily be safer or more suc-
cessful; in each case, the trade-offs are not easy.
Nationality Policy Gamble: Concessions Within
Limits
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Establishing a framework for dissolution of the USSR
is not on Gorbachev's agenda. Yet he does seek
solutions to the nationality problem that enjoy legiti- 25X1
macy, are not simply imposed by Moscow, and obvi-
ate levels of repression that would wreck his overall
policy of perestroyka. The vision he has articulated
over the past year or so?most recently at the Septem-
ber 1989 plenum of the Central Committee?
encompasses:
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? Transition of the USSR from a de facto unitary
empire tempered by toleration of local boss rule to a
more consensual union with real federative content.
? Constitutional delimitation of the functions of the
Center and the national republics, with an increase
in the authority allocated to the republics and some
decentralization of operational powers within the
Communist Party.
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? Removal of discriminatofy and provocative obsta-
cles to the development of non-Russian languages
and cultures, while preserving a strategic role for
Russian as the language of interethnic
communication.
? Equalization of the rights of all nations (including
minor nationalities and Russians), balanced by
equalization of the rights of individuals regardless
of their place of residence.
? Integration of the national republics within a single
unionwide economy, in which the "socialist market"
harmonizes the interests of the multiethnic whole
with the interests of the ethnic parts, but in which
there is also some devolution of power to the
republics.
The Soviet leadership confronts two quite different
types of ethnic crises: the assertion of traditional
nationalist demands for greater cultural, political, and
economic autonomy from the Center; and rage gener-
ated by economic and social grievances that finds an
outlet in communal violence. In principle, the first
type of crisis can possibly be resolved, if not through
political dialogue (there are many forms of autonomy
and even "independence"), then at least through a
type of crackdown that does not involve physical
force; whereas the second type requires physical re-
pression?utilized in a context, of course, that invites
more sympathy on the part of outside observers
In nationality policy, Gorbachev's gamble lies in the
scope he has permitted for public expression of ethnic
grievances and demands. He has acquiesced in a
mushrooming of "informal" organizations in the non-
Russian republics that, by any standard, are articulat-
ing "nationalist" views. He has tolerated substantial
absorption of ethnic platforms by republic Communist
Party organizations. With some exceptions, he has
sought to resolve nationality problems through dia-
logue and has generally exercised restraint in repress-
ing communal violence or pronational ethnic demon-
strations. Indeed, Moscow
may be willing to go very far to meet Baltic demands,
provided there is no deviation from the Center's line
on foreign policy, defense policy, and?perhaps less
categorically?financial-monetary policy.
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Gorbachev is evidently convinced that the potential
exists for the emergence of a broadly shared sense of
genuine unionwide community among most Soviet
citizens. Ethnic instability, he seems to believe, arises
basically from past policy mistakes and mismanage-
ment. Thus, ethnic unrest can eventually be moderat-
ed if these errors are corrected and legitimate ethnic
grievances addressed. He has issued several stern
warnings against "nationalism." At the September
1989 plenum of the Central Committee he observed
that "the time has ... come to talk with the clear and
forcible language of law about conditions under which
nationalist, chauvinist, and other extremist organiza-
tions can and should be banned and disbanded by the
court." But he probably believes that attempts to
"draw the line" through coercion are likely to trigger
still higher levels of ethnic tension and play into the
hands of opponents of perestroyka. And he seems to
be counting heavily on the reconstituted political
institutions of the USSR?especially the empowered
Supreme Soviet and local soviets?to provide a mech-
anism through which ethnic interests and demands
can be accommodated. He may hope to promote a
coalition between reformers in Moscow and moder-
ates in the non-Russian republics. In the Baltic area,
he appears to have gambled that prudence will tri-
umph over passion; that republic party leaders will be
able to convince the population that Moscow will
ultimately resort to force if compelled to do so, and
that the republics should not?in a reckless lurch
toward secession?risk what they now stand to gain.
However, the radicalization of ethnic demands and
expansion of the mass popular base for ethnic asser-
tiveness we see occurring, as well as the entrenchment
of communal violence, suggest how tenuous the pros-
pects are for Gorbachev's strategy. Lifting the lid on
the nationalities has energized anti-Russian senti-
ments among the titular nationalities after whom the
republics are named, created great anxiety among the
Russian settlers who constitute large fractions of the
population in major cities in these republics, and
opened a path for cross-republic ethnic strife. It has
also activated latent conflict between titular and small
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nationalities, produced a flow of more than 340,000
internal refugees since 1987, and set the stage for a
potentially sharp Russian backlash against Gorba-
chev's "permissiveness." In at least one case, Lithua-
nia, it is possible that the republic party organization
may proclaim its independence of the CPSU. While
security and economic interests probably will con-
strain some of the titular nationalities from seeking to
secede from the USSR, these inhibitions may not
apply to Baits, Belorussians, and Ukrainians
Economic Reform Gambles
In the economic reform area, Gorbachev's vision
postulates creation of a self-regulating "socialist mar-
ket" system in which central physical planning has
been largely eliminated and enterprises make deci-
sions essentially by responding to market forces.
Decision cues are provided by prices set largely by
supply and demand, and inputs are acquired through
direct contracts and wholesale trade. In this system
the state plays a coordinating role, sets the "overall
normative framework," and takes the lead in promot-
ing science and technology, infrastructure develop-
ment, environmental protection, establishment of a
financial-banking-tax system, enactment of antimono-
poly measures, and institutionalization of the entire
system within a structure of law. Operational control
would pass from middle levels of the bureaucracy to
the basic production unit, reflected in (a) a breakup of
large economic conglomerates and a transfer of con-
trol from the economic bureaucracy to production
collectives (especially through leasing), and (b) democ-
ratization of enterprise management, in which wor-
kers' collectives elect their managers and oversee key
production decisions. The "socialist" aspect of this
postulated system would apparently consist of two
features: retention and expansion of a strong welfare
state component (Sweden is mentioned as an example
to emulate); and continued public ownership of at
least most land and capital stock, although leasing
and other arrangements would substantially modify
the concept of property
Gorbachev's own policies, however?including the
steep reduction of revenues from state alcohol sales,
the financing from the budget of the crash machine-
building program, wage boosts for some categories of
3
workers, increased spending for social programs, and
escalating food subsidies?generated a rapidly rising
budgetary deficit and shortage of consumer goods
sufficiently ominous to persuade him in 1988-89 to
agree to a "stabilization" strategy for the next several
years. The main elements of this strategy are (a)
postponement of retail and wholesale price reform; (b)
the adoption of a crash budget deficit reduction,
resource reallocation, and consumption program; and
(c) continued pursuit of selected elements of structural
reform. This change of course has brought Soviet
domestic policy to a fateful crossroads.
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Postponement of Price Reform
Gorbachev's statements through mid-1988 strongly
favoring price reform make it abundantly clear he
understands that full transition to an economy in
which financial calculations effectively determine
decisionmaking depends on price reform. Neverthe-
less, he has publicly and repeatedly committed him-
self since then to postpone retail price reform "two or
three years," to discuss it with the public before doing
anything, and not to change prices without public
consent. In the absence of retail price reform, planned
hikes in wholesale prices would require increased state
subsidies that would add to the financial imbalance
Moscow is fighting to bring under control, and Gorba-
chev has also delayed these increases indefinitely.
There is no mystery why he has agreed to this critical
policy position: to proceed with price reform at this
point would also have been a difficult gamble. Gorba-
chev and his advisers were deterred by the prospect of
having to cope with a possibly violent popular re-
sponse to price increases, hoped to buy social peace,
and convinced themselves that conditions to move on
prices would be more propitious later once financial
"stabilization" had been achieved and hyperinflation
averted, the monopoly factor dealt with, and other
steps taken.
The costs of this gamble are likely to be enormous. By
largely postponing the establishment of the indispens-
able prerequisite for economically rational decision-
making, the gamble blocks workable decentralization,
the introduction of genuine wholesale trade, and
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reliance on financial levers?thus effectively putting
marketization on hold irrespective of other important
constraints. Failure to deal with wholesale prices will
intensify the problems and costs in the future of
currently underpriced nonrenewable resources (espe-
cially energy and minerals). It will also build further
irrationality into investment and the stock of fixed
capital, imposing still higher economic and social
costs downstream for corrective actions. Subsidies to
agriculture will also have to rise
On the retail side, Gorbachev's talk about price
reform has been an invitation to the population to
increase hoarding of consumer goods. The longer
retail prices are frozen, the more the pattern of
consumer demand is distorted, as faulty signals mis-
lead producers and consumers. If food sales increase,
so will food subsidies. Most important, delay may
make the ultimate problem of dealing with retail
prices that much more intractable: prices that might
only have had to be doubled, let us say, may?with
delay?have to be quadrupled. Meanwhile, the post-
ponement of retail and wholesale price reform will
expand corruption throughout the economy, produc-
ing an adverse effect on popular 'morale and public
tolerance for perestroyka.
The Crash Budget Deficit Reduction, Resource
Reallocation, and Consumption Program
In the period 1981-85 the average annual budget
deficit was 16.7 billion rubles. This figure rose to 58.7
billion rubles in 1986, 72.9 billion in 1987, 90.2 billion
in 1988, and a CIA-projected 126 billion in 1989.
Alarmed by the growing financial imbalance in the
country, the Soviet leadership has approved an "emer-
gency" program to reduce expenditures on invest-
ment, ' defense, subsidies to unprofitable enterprises,
administrative costs, and social programs, and to
increase revenues from imports of consumer goods,
turnover taxes on increased production of consumer
goods, and social insurance payments. There is discus-
sion of financing the deficit, in part at least, through
the sale of state securities and bonds bearing an
interest rate of 5 percent. The strategy has also
' State centralized investment for "productive" uses in 1990 is to be
30 percent less than the target for 1989, and for some sectors of
heavy industry the reduction is to be 40 percent
Secret
accelerated conversion of defense industry for civilian
production, mandated a crash expansion of consumer
goods production by all branches of industry, and
reversed signals by accepting the recommendation to
initiate increased imports of consumer goods. Gorba-
chev's hope is that he can "saturate" the consumer
market, mop up some of the huge cash savings of the
population, eliminate shortages, avert hyperinflation
or "barterization" of the economy, head off popular
unrest, and create equilibrium conditions under which
it will be possible later to initiate full marketization.
Yet it is highly likely that deficit reduction will fall
far short of planned targets. It will be hard to impose
investment cuts on ministries and republics, and there
is pressure?expressed already through the Supreme
Soviet?to block delays in the implementation of
social programs. Inflation itself will begin feeding
back to raise the level of government spending. More-
over, gains in projected revenues from turnover taxes
are based on unrealistically high targets for the
production of consumer goods, and subsidies for agri-
culture and other consumer goods will remain a major
drain on the budget.
There are other problems with the "stabilization"
formula. Without a price-imposed change on the
demand side, it is unrealistic to hope that supply can
catch up with consumer "needs." The across-the-
board campaign approach?implemented through the
very "command-edict" methods that Gorbachev says
he deplores?is likely to result in inferior products,
high costs, and waste. Expansion of consumer-goods
imports will impose still greater stress on Soviet hard
currency reserves, force acceptance of higher levels of
indebtedness, and defer imports for other sectors of
the economy. At the same time, fear of the economic
and political consequences of a higher hard currency
debt, and recognition that imports would have to be
far greater to substantially diminish the savings
"overhang," are likely to inhibit consumer-goods im-
ports as a central component of financial stabilization.
On the investment side, radical, abrupt shifts in
proportions historically have?by ignoring the inter-
dependence of different economic sectors?wasted
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resources and thrown the losers into a tailspin. It is
not inconceivable that the magnitude of cuts projected
in heavy industry could generate a chain reaction of
producer-good supply shortages, leading to a spiraling
downturn in production in the economy.
Selective Structural Reform
Gorbachev has by no means acknowledged that his
decision on prices and macroeconomic "stabilization"
puts economic reform on hold. He talks as if he wishes
to move ahead. At the September 1989 plenum of the
Central Committee he called attention to forthcoming
discussion by the Supreme Soviet of draft fundamen-
tal laws on ownership, land, leasing, republic econom-
ic rights, the local economy, self-management, and
taxation. And, in fact, there is momentum to press
forward with implementation of the 1987 Law on the
State Enterprise and elements of reform that are
preconditions of marketization, such as expansion of
enterprise rights in setting prices, wages, and output
levels; partial derationing of industrial supplies; and
reduction in the number of plan indicators. In the
absence of rational prices and other essential condi-
tions, however, these steps have the perverse effect of
promoting arbitrary or monopolistic price increases
rather than cost reduction, wasting "cheap" energy
and raw materials, encouraging wage increases not
matched by productivity gains, and motivating enter-
prises to produce the wrong output mix. The devolu-
tion of some economic decision making authority from
the Center to the republic and regional levels, which is
also being conducted under the rubric of economic
"reform," can have some beneficial effects, but risks
simply transferring "command" methods from the
State Planning Committee to local bureaucrats and
strengthening autarkic tendencies that weaken overall
marketization.
A Gorbachev initiative with serious long-term impli-
cations has been the fostering of new forms of "owner-
ship" and management of production units. Gorba-
chev believes that the establishment of proprietary
interest is a basic key to economic revitalization and
that this condition cannot be achieved under the
present depersonalized state ownership of the means
of production. Thus he is pushing strongly for accep-
tance of the proposition that "various" forms of
ownership are legitimate under "socialism." Yet, at
5
the same time, he has sharply attacked Western-style
private ownership of the means of production, equat-
ing this with "exploitation." Although he supports
cooperatives, the solution to this ideological dilemma,
he emphasizes over and over, is the leasing of capital 25X1
stock and land to production collectives. He has in
mind not just agriculture and services, but large
chunks of industry. He clearly hopes that leasehold
property "ownership" will engender proprietary inter-
est, combat monopoly, and defeat bureaucratic sabo-
tage of perestroyka?while avoiding the supposed
adverse social consequences of real privatization. In
the not too distant future it is quite possible that
Gorbachev will unleash a big campaign to shift the
economy to leaseholding, despite resistance to it by
Yegor Ligachev and perhaps other members of the
Politburo 25X1
The difficulty with Gorbachev's calculation is that
experience in both Eastern Europe and the West
suggests that leaseholding does not produce the same
positive benefits as private ownership, although in
certain limited situations the results may be useful.
Leaseholding does not provide the basis for creation of
a true capital market, with the sale and purchase of
production assets. Thus market prices for capital and
land cannot emerge. Prices for these resources would
still have to be set by planners and could not reflect
particular circumstances or changes in values over
time. Nor does leaseholding create the same interest
or empowerment of specific individuals to seek to
increase the value of enterprise assets. On the con-
trary, it may well make required investment and
structural rationalization decisions more difficult by
encouraging leaseholders of state-owned property sim-
ply to "mine" their assets?diminishing the econo-
my's production capacity over time.
Possibly Gorbachev recognizes these problems and
sees leaseholding as an ideologically defensible "co-
ver" for a longer term transition from collective to
private ownership.
he really does reject large-
scale private ownership on ideological grounds and
believes that leaseholding provides a workable "socia-
list" alternative. His attacks on private ownership
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have been complemented by hedging in his defense of
cooperatives. By making these politically convenient
accommodations to the dominant collectivist prefer-
ences of Soviet elites and the population, at a time in
which the absence of legally regulated markets is
spawning growing corruption throughout the decen-
tralized sector of the economy, Gorbachev is reinforc-
ing strong impulses that exist to reassert "administra-
tive" controls over the economy
The collectivist predicament carries over into the
sphere of management. Gorbachev has vigorously
supported workplace democratization, including the
election of managers, as a means of breaking resis-
tance to perestroyka within the bureaucracy and
overcoming alienation and apathy among the work
force. The principle of electivity of managers was
codified in the Law on State Enterprises, adopted in
July 1987. In combination with collective leasehold-
ing, however, workplace democratization would ap-
pear?potentially at least?to be setting the Soviet
Union on the Yugoslav path. It will probably discour-
age investment by enterprises, encourage unjustified
wage increases, make it harder to broaden wage
differentials, strengthen pressures to continue subsi-
dizing enterprises operating at a loss, and promote
inflation.
Political Reform Gambles
Drawing on the experience of earlier economic reform
efforts, Gorbachev has argued that economic reform
will fail unless it is underpinned by political reform.
Since 1987 he has promoted political reform as the
key to perestroyka. His aim is to replace the tradition-
al Stalinist system of political power with an entirely
new structure that is less centralized, more democrat-
ic, more open to the unrestricted flow of political ideas
and information, more "constitutionalized" through
fundamental law, and more protective of the citizen's
civil liberties. The key changes are those affecting the
demarcation of functions and power between the
party apparatus and the popularly elected soviets.
Transformation of the Communist Party
In the existing Soviet system the Communist Party
has provided the central mechanism of political inte-
gration. Under its aegis, acting more or less collegially
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through bureaus selected co-optatively at all levels of
the party, representatives of the system's key institu-
tions (the economic hierarchy, the soviets, the security
organs, and?especially?the party's own bureaucra-
cy) have decided policy. In this system the party
bureaucracy?the "apparatus"?has itself routinely
exercised the right to issue binding orders to officials
in all other bureaucracies. It has also controlled the
process of personnel appointments to all leadership
posts in all institutions, whether these posts are
appointive or nominally "elective," through the no-
menklatura system. Below the central level, the key
function actually performed by the party apparatus
has been to implement rather than make or win
converts for policy. Its most important role in this
respect has been to cope with inconsistencies between
enterprise production targets and available inputs
caused by incoherent economic plans. (This is why top
positions in the party apparatus, at least in the
Russian Republic, have generally been staffed with
engineers.) The real role of the army of "ideological"
functionaries in the party has been not so much to
argue the party's position and build party "legitima-
cy," as to communicate what the party leadership's
position is on various issues. The problem of party
"authority" until recently was not particularly ger-
mane, because there was no political competitition,
few people were prepared to challenge the party line,
and those who did were handled by a different
bureaucracy?the KGB.
Gorbachev appears to believe that the party should
continue to integrate the entire Soviet system ("per-
form its vanguard role"). He has an altogether differ-
ent vision, however, of how this function is to be
performed. In his view, the party should abandon its
de facto executive and legislative activity. It should:
? Cede rulemaking power to the soviets and other
state or public organizations.
? Stop issuing binding orders to all other
organizations.
? Curtail dictation of personnel appointments through
the nomenklatura system.
? Remove itself from day-to-day involvement in the
implementation of economic plans.
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At the same time, the party should strengthen its
"political" role by:
? Serving as a brain trust at all levels to generate
appropriate macropolicies.
? Winning authority for the party and its line by force
of persuasion in the emerging competitive political
arena.
? Influencing elections and personnel appointments in
all institutions by cultivating and presenting the
"best" candidates.
? Incorporating the interests of all strata of the
population through broad external dialogue and
internal party democratization
Gorbachev is, in fact, attempting to implement this
model. He has weakened the Central Committee
Secretariat and may be reaching policy decisions in an
informal group outside the Politburo. He has elimi-
nated the branch economic departments in the appa-
ratus?the organizational base for day-to-day party
intervention in the economy. He has ordered party
officials to exert influence through persuasion rather
than command. He has attacked the nomenklatura
system as prone to error and the perpetuation of
mediocrity. He is urging party leaders at all levels not
to wait for instructions from above but to develop
their own "action programs." He is demanding that
all party officials emulate his own example and carry
the case for perestroyka to the population through the
mass media. He is promoting competitive elections
within the party. And he is instigating personnel cuts
in the party apparatus and a large-scale turnover of
party cadres, to which he attaches great significance.
Essentially, Gorbachev's program implies the liquida-
tion of the CPSU as it has existed and the creation of
an organization that is new in its functions, structure,
personnel, and relationships with other parts of the
Soviet system. Through this transformation the party
is to regain both the will and the legitimacy to rule.
Were such a metamorphosis to succeed, it could in
principle create an integrating vehicle compatible
with democratized soviets and other elective organiza-
tions. It would also clear away resistance in the party
apparatus to perestroyka.
7
The odds against the desired transformation of the
party, nonetheless, are formidable. Exhortation to
exert influence through persuasion is unlikely to give
the party enough moral authority to compensate for
loss of the operational power to issue orders and
dictate personnel appointments. It is questionable
whether purging the party apparatus will increase its
ability to operate in a competitive political environ-
ment as much as Gorbachev seems to hope. Pravda
complained editorially in June that "a considerable
part of the party apparatus is in total disarray and is
unable to find its bearings in the new situation." And
it is difficult to identify, beyond presumed psychic
rewards, what the payoffs are to be that will motivate
party officials. Rather, the odds seem much higher
that Gorbachev's strategy will simply undermine the
real-life CPSU, weaken its ability to bring order to a
still nonmarketized economy, increase uncertainty as
to its role, further demoralize both cadres and rank-
and-file members, and intensify the already high level
of anger of the apparatus toward Gorbachev.
Empowering Democratized Soviets
Gorbachev is banking heavily on the soviets being
able in a timely and effective manner to fill the
vacuum created by his redefinition of the party's role.
What he seeks is a mechanism that enjoys legitimacy,
is sensitive to pressures from below, is able to recon-
cile conflicting popular interests and demands, is
capable of controlling officialdom, and is nevertheless
responsive at least in general terms to party guidance.
With the election of the new Congress of People's
Deputies and formation of the Supreme Soviet, the
first meeting of the Congress in June and subsequent
session of the Supreme Soviet, and the upcoming
elections to local soviets in the fall, Gorbachev has
launched Soviet politics on a promising but perilous
path.
We should not exclude the possibility that this venture
will eventually succeed. Much of the brief experience
of the Congress and new Supreme Soviet?especially
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the emergence of a new corps of middle-class politi-
cians, the frank discussion of formerly taboo topics,
the role of deputies in helping to solve the miners'
strikes, and the rejection of some nominees to the
Council of Ministers?provides grounds for hope. But
the politicization of the Soviet population, the urgency
of public needs, and the radicalization of demands
made by the rapidly growing number of "informal"
groups will impose severe strains on these new institu-
tions. Tolerance and compromise are not yet part of
the political culture of either the new Soviet electorate
or the new deputies. Political competition in this
arena, contrary to Gorbachev's calculations, may
work against the establishment of market socialism.
Conflicts generated over ethnic issues will be bitter. A
"hardhat workers" politics of unpredictable orienta-
tion may emerge. The new institutions currently lack
most of the operational attributes of functioning
democratic parliaments that help them to conduct
business and deal with such pressures, and these can
develop only with time
Whether multiparty political competition will emerge
as the new soviets evolve is a critical issue. With the
formation of the "Interregional Group" of deputies,
the collective action of Baltic deputies, and the cau-
cusing of "workers' deputies," organized opposition
has already arrived in the Supreme Soviet. Some
participants in these groups visualize the rapid emer-
gence of multiparty politics. And several groups out-
side the Supreme Soviet?for example, the Christian
Democratic Union, the Social Democratic Associa-
tion, the Democratic Perestroyka Club, and the vari-
ous ethnic fronts?are already organizing as political
parties
It is conceivable that Gorbachev privately welcomes
the prospective emergence of multiparty competition
as a long-term stabilizer of the USSR's new mass
politics. In this scenario, he might hope simply to
preserve the Communist Party's de jure monopoly
long enough to effect the transfer of real power from
the CPSU to the Supreme Soviet, at which point
traditionalists in the party would be unable to prevent
recognition of a multiparty fait accompli. It is more
likely, however, that?as he told Hungarian leaders
Nyers and Grosz in July?he is prepared to accept
multiparty politics in Hungary but does not want such
Secret
a system established in the USSR. Publicly, he has
repeatedly criticized advocacy of multipartyism in the
Soviet Union?arguing that this would multiply
cleavages in an already "complex" society and, most
important, would promote ethnic strife. In this scenar-
io, he would be aware that his invitation to informal
groups to participate in parliamentary politics could
lead to the formation of other parties, as Nikolay
Ryzhkov and others have warned, but planned to
maintain the CPSU's preponderant role by somehow
taming or co-opting the main opposition groups.
In the meantime, as Ryzhkov has also observed, the
creation of the new activist Supreme Soviet headed by
Gorbachev introduces an element of profound ambi-
guity in the distribution of power and authority
between the CPSU Central Committee and Politburo,
the Supreme Soviet, and the Council of Ministers at
the very top of the Soviet system. When local elections
are held and empowered soviets formed at all lower
levels, this ambiguity will spread throughout the
system, potentially setting the stage for a generalized
"constitutional" crisis. Large numbers of party secre-
taries are likely to be defeated in these elections. To
the extent that election by the populace to the respec-
tive soviet is seen to be a necessary validation of a
party secretary's tenure of office, political reform will
sharply heighten anxiety and promote cleavage within
the party apparatus. Gorbachev probably hopes to use
the crisis resulting from elections to the soviets to
redefine formally, both constitutionally and through
revision of the party rules, the division of labor and
respective powers of party, state, and government
organs
Implications
Stability
Gorbachev's vision of a liberal Communist future
seeks to reconcile satisfaction of ethnic demands with
preservation of the Soviet multinational state, piece-
meal introduction of marketization with "socialism,"
and democratization with maintenance of the Com-
munist Party's "vanguard role." Minimizing blood-
shed has been central to his tactics. His desire to avoid
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major confrontation with the population and to find
"political" solutions to problems is reflected in his
encouragement of politicization of the population and
tolerance of social turbulence; his readiness to inter-
pret hostility toward the Communist Party and the
Soviet system as a product simply of failure by the
regime to eradicate past "mistakes"; his propensity to
ignore ideological "provocation"; his optimism about
reaching the "correct" solutions to problems through
rational calculation, dialogue, and compromise; and
his disinclination to use force or administrative pres-
sure.
These qualities are reflected in the gambles discussed
in this paper, which in turn are generating major
problems:
? In the nationality arena, glasnost and Gorbachev's
gamble on defusing ethnic grievances and achieving
a more voluntary federative union through dialogue
is activating passions on all sides, stimulating a
serious secessionist challenge, and fueling an impe-
rial backlash.
? In the economic arena, Gorbachev's gamble on
postponement of price reform, a crash consumption
program, and selective pursuit of certain structural
changes has placed real marketization on hold,
mortgaged its introduction to a financial stabiliza-
tion program that is more likely than not to fail,
possibly compromised its eventual success with
strictures against private economic activity, and set
the stage for continued corruption and protracted
economic crisis.
? In the political arena, Gorbachev's gamble on re-
constituting the Communist Party along lines that
have no parallel in single-party (or multiparty)
systems elsewhere is seriously weakening the central
existing mechanism for societal integration in the
USSR, while the gamble on instituting guided
democracy through the soviets is likely to impose
large new strains on the regime sooner than it
provides an effective means for dealing with them.
Gorbachev has no easy options, and other gambles
would have produced other problems. Wherever those
problems might have led, the set of problems Gorbachev
has in fact fostered is likely to lead in the foreseeable
future to major instability in the USSR
9
So far, neither the rioting, nor the communal violence,
nor the demonstrations that have occurred in the non-
Russian republics have compelled Gorbachev to resort
to more than limited doses of armed repression. The
most violent conflicts have largely not involved natives
versus Russians. However, with the escalation of
ethnic assertiveness generally since 1988, the radical-
ization of Baltic demands, and the growth of Russian
nationalist sentiment, the stage is being set for major
Russian/non-Russian conflict. Potentially, the most
explosive near-term source of such combustion is the
backlash of large numbers of Russians living in the 25X1
borderlands to native attempts to assure priority of
the local language, residency requirements for politi-
cal participation, and progress toward autonomy or
even independence. The fears now displayed among
Russians in the Baltic republics and Moldavia could
lead spontaneously to confrontations that would re-
quire large-scale intervention by Moscow. But they
also provide fertile soil for provocation by Gorba-
chev's opponents designed to force broad intervention
that would undermine perestroyka. At some point,
even in the absence of settler-instigated conflict,
native assertiveness is likely to precipitate confronta-
tion with the Center, however self-disciplined the non-
Russians may be. One factor that could lead to such a
clash might be Moscow's determination not to allow
relaxation of controls in the Baltic republics to set a
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Gorbachev has sought to replace Brezhnev's tacit
understanding with the population, which essentially
provided a guaranteed minimum living standard and
social security benefits in return for political passivity,
with a new "social contract" that would provide
greater economic opportunity and political participa-
tion in exchange for harder work and less economic
security. But his economic gamble is unlikely to
generate the sustained growth in material rewards
necessary to support such a transition. At best, the
policy will stabilize a deteriorating situation; if it fails,
the result could be hyperinflation and the emergence
of a barter economy. And the policy still leaves the
economy in a state of protracted vulnerability to at
least three generators of an economic downturn that
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would further enhance the likelihood of street politics:
the incoherent current blend of "plan" and "market";
the possible chain reaction of producer-good supply
shortages noted above; and?not least?major strike
activity.
Gorbachev was able in July to deflect blame for the
miners' strikes and turn them to his own immediate
advantage, but only by granting major concessions to
the miners that will increase the deficit and may well
encourage more groups to use ultimatum politics.
the strike com-
mittees in the Donbass virtually controlled the mining
towns, meeting with no resistance from the local party
structures. Heady from their success, organized min-
ers are spearheading formation of a mass labor move-
ment, which might develop widespread support among
workers who want the security of the old social
contract as well as the improved quality of life
perestroyka promises.
Glasnost, the evaporation of fear of authority, and
Gorbachev's attempt to mobilize popular pressure
against bureaucratic vested interests have?in combi-
nation with consumer dissatisfaction and diffuse pub-
lic anger toward the Establishment?tapped latent
impulses and energized political moods at the base of
Soviet society. The old "transmission belts"?espe-
cially the trade unions and Komsomol?that integrat-
ed the "masses" with the regime have, in the new
competitive environment, become increasingly irrele-
vant. Elections to the Congress of People's Deputies
revealed how little confidence the party apparatus
itself enjoys among the population at large. Gorba-
chev's gamble on radically restructuring Soviet politi-
cal institutions is further weakening the old mecha-
nisms that repressed popular unhappiness.
Opinion polls
suggest that the public's priority concern is
improving the standard of living. To the extent that
the new Supreme Soviet and local soviets act as
vehicles for absorbing mass unrest, they are likely to
press for welfare spending, wage increases, subsidies
for unprofitable enterprises, delay of price reform,
and other measures that will increase the difficulty of
moving toward effective marketization. In this sense,
the phasing in of political reform before economic
reform may have severe long-term costs.
Secret
But political competition encouraged by reform is
giving voice to other concerns as well: about public
order, crime, loss of control in the borderlands, envi-
ronmental destruction, erosion of traditional values,
elite corruption, and profiteering by cooperatives. This
volatile mixture of grievances could, under conditions
of continuing consumer deprivation, lead to outbreaks
of anarchic violence or provide a social base for
attempts by political elites to reverse Gorbachev's
policies.
Political Outcomes
Gorbachev's gamble on a protracted transition to
marketization, unless modified, is likely to delay
serious economic revitalization indefinitely and create
conditions of chronic instability irrespective of the
destabilizing impact of ethnic conflict. Under these
conditions, governing the Soviet Union will become
progressively more difficult. Yet the fragmentation of
political power currently under way will probably
continue. Within the party, divisions now visible
pitting natives against Russians within the republics,
republic party organizations against other republic
party organizations and against the Center, RSFSR
oblast party organizations against the Central Com-
mittee apparatus, and liberal against traditionalist
factions, will expand. And Gorbachev's personal au-
thority within the party and among the population at
large will probably continue to decline, despite his
political victory at the September plenum of the
Central Committee.
Some observers have speculated that anarchy will be
the end result of these developments. This is a highly
unlikely outcome: if "anarchy" does occur, it will
simply mark the transition from one set of political
arrangements to another. What is likely is that insta-
bility will force the Soviet leadership to choose from
an array of crackdown measures, ranging from stron-
ger threats, to new restrictions on freedom of speech
and assembly, to bans on strikes, to personnel purges,
to exertion of economic pressures, to police or military
intimidation, to deployment of larger and more ag-
gressive security forces, to declaration of states of
emergency, to imposition of martial law. Choices here
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will hinge partly on how threatening to regime surviv-
al conditions of instability are judged to be, partly on
how effective in suppressing disorder given types of
crackdown are predicted to be, and partly on how
counterproductive the crackdown measures are held
to be in terms of frustrating attainment of other key
objectives.
The record suggests that Gorbachev has a high
tolerance for disorder, will seek as long as possible to
find compromise solutions, and, when decisive action
becomes necessary, will attempt to select measures at
the lower end of the crackdown scale. He seems to
fear that bloodshed resulting from a crackdown would
seriously exacerbate conflict situations; he probably
has not been impressed by the efficacy of force
applied in Central Asia and the Caucasus; and he
must fear the consequences for perestroyka and his
foreign policy of a broad and extended resort to armed
might.
there are strong
differences in the Politburo over resort to muscle in
dealing with instability.
A major escalation of repression, especially if it
involved the imposition of martial law, could well pose
the question of who should lead the USSR. Currently
there is much speculation in Moscow about martial
law, the acquisition by Gorbachev of unrestrained
power, coups, and military takeovers. Gorbachev
might be inclined to adopt a broad view of his
prerogatives as head of state, and perhaps even exer-
cise limited emergency powers in an effort to advance
perestroyka. He would be willing to escalate coercion
somewhat to maintain order and isolate nationalist or
other "extremists." At the September 1989 plenum of
the Central Committee he condemned "extremist
rallies that provoke interethnic clashes and terrorize
and intimidate people of other nationalities," and
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declared that "where a threat to the safety and life of
people arises, we will move decisively using the full
force of Soviet laws." He also observed, with respect
to Nagorno-Karabakh, that "we stand before the need
to take resolute measures; we cannot allow anarchy,
let alone bloodshed."
Yet it is highly doubtful that Gorbachev would
abandon his reform program and his natural constitu-
ency by sanctioning indiscriminate violence, or engage
in a bid to seize dictatorial power through an alliance
with his political enemies. It is possible, however, that
he might choose to resign rather than assume respon-
sibility for a crackdown involving a major imposition
of martial law.
Gorbachev seemed to imply that he
would have resigned rather than order force to be
used against the strikers.
in a speech he delivered more
recently in Leningrad. Naturally, he could also justify
retaining office (if he were indeed inclined to resign)
on "lesser evil" grounds.
In the event that Gorbachev remains in power, his
resort to force is likely to be limited, and instability
will not easily deflect processes that appear to be
heading toward further democratization of the politi-
cal order, some form of multipartyism, and a loosen-
ing (or, in the Baltic case, even a breakup) of the
Soviet multinational empire?provided Gorbachev
can avoid sharp political polarization and achieve
some reinstitutionalization of political integration
through the soviets. If there is financial stabilization
and marketization, there might be high instability in
the near term (two to five years) but a course could be
set toward long-term (10 to 25 years) social equilibri-
um. Without financial stabilization and marketization
(which are now in serious jeopardy), there would be
rising instability in the near-to-medium term, high
instability in the long term, and likely movement of
the Soviet system toward revolution, a hard-right
takeover, or what has been termed "Ottomaniza-
tion"?a slow process of imperial-decline with un-
planned piecemeal emancipation of constituent enti-
ties in a context of growing relative backwardness of
the whole in relation to the capitalist West
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The trend toward liberalization and imperial dissolu-
tion is perceived as a clear and present danger by
some members of the Soviet political elite, who are
shocked by what they perceive as a breakdown of
social discipline and loss of regime control. Their
anxiety, fear, and anger could still crystalize in an
attempted coup, legal removal of Gorbachev, or even
assassination. Judging by what is being said publicly
by Gorbachev's critics in the apparat,
a traditionalist restoration
would not be simply a throwback to the Brezhnev
regime. It would accept the need for significant
change, including reductions in defense spending and
decentralization of management, but would attempt
to "draw the line" in many areas?especially democ-
ratization of the party and government, the media, the
conduct of "informal" groups, and expression of
"nationalist" views?in which Gorbachev's liberalism
is seen as outrageous. Although the odds are high that
a traditionalist regime would increase restrictions on
private entrepreneurial activity and marketization, it
is not altogether inconceivable?depending on who
was in charge?that such a leadership might take
advantage of limits on public expression to move
forward vigorously with marketization. Barring this
slim possibility, the prognosis for such a regime would
be near-term stability but high medium- to long-term
instability, leading to Ottomanization or upheaval
from below.
The length of Gorbachev's tenure is an important
variable. In the event that he is not soon overthrown,
his gambles on ethnic and political reform are likely
to increase the social forces of resistance to an
orthodox reaction. Such a development would corre-
spondingly increase the degree of coercion required to
"restore order." Those intent on such a course of
action might seek to gain support from the military or
KGB, or to mobilize elements of the working-class
population to back their cause. Political maneuvering
to develop and define a mass "workers" movement is
already under way. Gorbachev is seeking to enlist the
"workers" as a force for perestroyka. Populist figures
such as Boris Yel'tsin may seek to appeal to the
welfare-state preferences of the working class. Reac-
tionaries would espouse neofascist slogans designed to
tap into the anti-intellectual, anti-Semitic, anticapi-
talist, xenophobic, Russian nationalist moods that also
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exist among many "workers." A successful tradition-
alist or reactionary restoration, however, would solve
neither the economic problems nor the nationality
problems, and thus would perpetuate instability?
repressed if not open.
Implications for the United States
Under any scenario, economic tensions, acute con-
sumer dissatisfaction, labor unrest, and ethnic strife
virtually guarantee that the United States will have to
deal with a Soviet leadership that faces endemic
popular instability. The chances that economic reform
will significantly reduce the potential for instability in
the foreseeable future are low, and are certainly less
than the chances that Gorbachev's own gambles will
foster continuing economic stagnation or decline. Gor-
bachev will maneuver to dampen instability through
compromise and to avoid armed confrontation and
bloodshed. He may muddle through more successfully
than appears likely. But the odds are great neverthe-
less that labor unrest or ethnic conflict will?perhaps
even within the next six months?create strong pres-
sures within the leadership to crack down much
harder than it has to date. Gorbachev may well agree
to more repression in order to retain power. It is
likely, in this context, that an alternative leader would
not only initiate more brutal repression than Gorba-
chev might, but would cite instability as the pretext
for a general attack on Gorbachev's political reforms.
Moscow's preoccupation with instability is likely for
the foreseeable future?regardless of other factors?
to prevent a return to the arsenal state economy that
generated the fundamental military threat to the
West in the period since World War II. The Soviet
leadership's focus on internal order in the USSR will
probably accelerate the decay of Communist systems
and growth of regional instability in Eastern Europe,
pointing to the need for post-Yalta arrangements of
some kind and confronting the United States with
severe foreign policy and strategic challenges. Insta-
bility in the USSR will increase uncertainty in the
West about proper policies to pursue toward Moscow,
reflecting nervousness about Soviet developments but
nonchalance about defense, and will impose stress on
domestic and alliance decisionmaking.
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To cope with the crises that promote instability,
Gorbachev needs to transfer more resources from
military to consumer needs. From a personal stand-
point, he needs to defend himself against charges that
he is selling out Soviet security interests and has been
seduced by praise from the "class" enemy. Thus, he
needs demonstrable results from the arms talks that
will permit him to argue that the external "threat"
has receded even further. Likewise, he needs trade
and technology transfer from the West to overcome
bottlenecks in the Soviet economy. Obviously, he does
not need Western actions that call into question the
efficacy of "New Thinking" in foreign policy, or that
could be interpreted as challenging Soviet security
interests globally, in Eastern Europe, or internally, or
of "taking advantage" of Soviet internal instability.
The chances that Gorbachev will successfully over-
come the dilemmas (many of his own making) that
confront him are?over the long term?doubtful at
best. But the process of pluralistic forces taking root
in Soviet society strengthens the rule of law, builds
constraints on the exercise of power, and fosters
resistance to any turnaround in military spending and
to reinvigoration of an expansionist foreign policy?
which, as argued above, will be strongly inhibited in
any event by the insistent demands of consumption
and the civilian sector. This process, and the deter-
rence of a militantly reactionary restoration that
might attempt to bring about a basic shift in the
Soviet Union's foreign posture, benefits greatly from
each year's prolongation of Gorbachev's rule
A key weakness in Gorbachev's strategy that will
perpetuate instability is its hesitant approach to mar-
ketization and its unwillingness to face up to the
necessity of real privatization of ownership of capital
stock and land. Soviet leaders from Gorbachev down
are, at the moment, uniquely open to contact with the
West. Serious private Western dialogue with them
and their advisers on economic theory could influence
their thinking. Reduction of instability over the long
term requires the steady extension of a law-based
private sector in the Soviet economy.
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Harsh repression of labor unrest or of food riots in
Russian cities are certainly contingencies that could
confront US policymakers with the need to respond.
But instability provoked by Gorbachev's gambles is
likely to present its severest challenge to US policy-
making through a crackdown of some sort in the
ethnic arena?probably not in response to communal
violence, but in the form of intervention to suppress
Russian/native clashes or the drive of non-Russians
for greater autonomy. Such a crackdown is most
likely in the Baltic region but could also come in the
Caucasus, Moldavia, or?down the road?even the
Ukraine
Gorbachev has said he wants to create a constitution-
ally structured federative union based on the consent
of the constituent republics. Movement away from the
heretofore existing situation toward such a goal would
in general be positive from the US standpoint. Howev-
er, Gorbachev is not interested in creating a frame-
work for weak confederation or dissolution of the
USSR, nor would he be able to marshall political
support within the elite for such an outcome; yet this
is precisely what acceptance of the more radical
Baltic demands would imply. The new draft CPSU
platform on nationality policy hints at the acceptabil-
ity of a regionally differentiated approach to Soviet
federalism. It is possible that Gorbachev may be
prepared to broker a special status for the Baltic
republics, and this could incorporate a potential for
evolution toward still greater autonomy. A wide range
of configurations of "autonomy" or "independence" is
conceivable. In such a context the Soviets might be
interested at some point in discussing with Washing-
ton their regional security concerns, which would
probably bear heavily on such a decision.
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