Five Hundred Days Plan

Stanislav Shatalin, Man, Freedom, and the Market. October 31, 1990

After four years of political reform and promises of economic liberalization, the performance of the Soviet economy began to deteriorate, as production declined and shortages spread. A series of economic reform proposals culminated in the “500 Days” plan of August- September, 1990, presented to Gorbachev and Eltsin by a group of economists led by Academician Stanislav Shatalin. They proposed to rescue the economy through rapid de-control, decentralization, and privatization. The plan lapsed when Gorbachev abandoned it a month later, but it served as the basis of Eltsin’s reforms in Russia after the collapse of the Union government in 1991.

Original Source: Izvestiia, 4 September 1990.

This program could appear only under the conditions of restructuring, and it lies entirely within the channel of the policy begun in 1985. M. S. Gorbachev and B. N. Eltsin were the initiators of its preparation. It can be carried out only with their joint support.

As a result of many years of domination by a totalitarian social and political system, our society has ended up in a state of deep crisis. The indecisiveness of the government and the miscalculations it has made in economic policy have brought the country to the brink of catastrophe. People’s lives are becoming more and more difficult, and hopes for a better future are being lost. The situation can be overcome only by well-thought-out and energetic actions, supported by the people and grounded in their solidarity and patriotism …

The program’s main distinguishing feature is that it is grounded in a fundamentally new economic doctrine. Movement toward a market will be above all at the expense of the state, not at the expense of ordinary people.

An essentially anti-popular policy was pursued for a long period: a rich state with a poor people. The state concentrated in its hands enormous resources, virtually the entire ownership of means of production. Resources were spent thoughtlessly on gigantic and inefficient projects, on building up military might and on foreign policy adventures with an ideological underpinning, although all this has long been beyond our means.

The program sets the task of taking everything possible away from the state and giving it to people. There is serious reason to believe that the return to the people of a significant share of property and resources on various terms will ensure much more efficient and thrifty use of this property and these resources and will make it possible to avoid many negative phenomena in the process of changing over to a market. It is necessary to resolutely reduce all state spending, including spending on items concealed from society …

No one is imposing a kind or type of activity on anyone; everyone is free to choose for himself, gearing his choice to his desires and possibilities: whether to become an entrepreneur, a hired employee in state structures or a manager in a joint-stock enterprise, engage in individual enterprise, or become a member of a cooperative. The reform grants citizens the right of economic self-determination, establishing rules the observance of which will prevent certain entities (people, groups of people, enterprises or geographic areas) from securing their own interests by infringing Oil the economic rights of others. It is freedom of choice that is the basis of people’s personal freedom, the foundation for disclosing the individual’s creative potential. These are still not the rules of the future market economy that will emerge in the course of the formation and development of this society. The economic content of the proposed program is the changeover to a market, the creation of the foundations of a society with a new economic system.

The right to property is realized through destatization and privatization, through the transfer of state property to citizens. It is in the return of property to the people, first and foremost, that the social orientation of the economy is manifested. This is not an act of revenge but the restoration of social justice, a form of codifying a person’s right to his share of the country’s accumulated national wealth and of the wealth that will be created in the future. Privatization-and special emphasis should be placed on this-is a form of distributing responsibility for the condition and level of the development of society among all of its members who desire to take on this responsibility. Privatization should be absolutely voluntary and should not resemble collectivization in reverse.

Property in the hands of everyone-this is a guarantee of the stability of society, an important condition for preventing social and national upheavals. A person who has his own home and plot of land, which he can always transfer or leave to his children, a person who owns stocks or other financial assets, has an objective stake in the stability of society, in social and national concord. Oil the other hand, our sad experience shows how dangerous for society, for its normal life and development, is a person who has nothing to lose.

The program gives equal chances to everyone. However, this equality of chances should not be perceived as a mirror image of wage-leveling. In order to prevent privatization from turning into a means for the legal and excessive enrichment of the few, the procedure itself should ensure participation in privatization by very broad strata of the population: Virtually everyone, even if he has no substantial initial capital, should be able, if he so desires, to obtain his share of the national wealth. Equality of opportunity will be ensured by a diversity of forms of privatization, which will make it possible to lease property, to buy it on credit, to acquire it on a joint-stock basis, etc …

The reform is aimed at normalizing the condition of the consumer market through liberalizing price formation. But during the transitional period this will be done by forming commodity reserves, including through import deliveries, taking into account the forthcoming stage-by-stage changeover to unrestricted prices for many types of goods. An unrestricted exchange rate for buying and selling foreign currency will be introduced, and a foreign- currency market will be developed. A number of large banks will receive the right to trade in foreign currency at market prices, and Soviet citizens will be permitted to keep foreign -currency freely in banks …

… Without structural reorganization it will be impossible in principle to achieve an), kind of significant growth in the standard of living. Of course, the shutdown and reconfiguration of many production facilities will require temporary layoffs and retraining for a large number of people. In this way, a new, more efficient employment structure will be formed, and arduous and hazardous production sectors and manual labor will be cut back. And the more highly skilled employees at new, high -efficiency production facilities will earn more money.

It is planned to reorganize job-placement services and introduce the payment of benefits to those who for some reason are looking for new jobs. When people arc looking for jobs, with the active participation of state services, the)’ may take part in public works projects: in the building of roads or homes, first of all homes for themselves. Those who so wish will be able to obtain a plot of land and till it.

There are plans to organize courses and programs for the retraining and refresher training of workers and office employees and to form a system of volunteer-manned public works projects. The critical nature of the employment problem will be eased considerably by the creation of additional job slots at new production facilities, in trade and in the service sphere, and by providing incentives for the development of entrepreneurship and small enterprises.

The regulation of employment should ensure not the permanent assignment of a worker to a specific job but the creation of conditions for continuous growth in qualifications and occupational skills. It is the development of such a continuously operating mechanism and its improvement in accordance with emerging problems that will become the core of state employment policy.

… The economic freedom of enterprises consists in granting them the opportunity to operate in the interests of their employees, stockholder-owners and the state and in accordance with market conditions, to independently determine the volume and structure of their production, the volume of sales and prices for their output, and to choose their partners …

The main thesis in relations between the republics and the center is that no one is to direct or give orders to anyone else. The entire program is based on respect for the declarations of sovereignty adopted by the republics. It is impossible to conduct the economic reform on the basis of directives from the center, no matter how right they may be. The peoples will no longer put up with a situation in which fundamental questions of their lives are resolved at the center, without their participation. The program takes into account the rapid growth of national self-awareness, and therefore the principal role in implementing the transformations is assigned to the republic governments and local bodies of power. Power should be brought closer to people.

In exercising their rights to economic sovereignty, the peoples will receive an opportunity to dispose of the national wealth of their republics on their own, to prevent the senseless wasting of resources, and to preserve the environment and mineral wealth for coming generations. The republic governments now bear responsibility for the development of the territories under their jurisdiction and, accordingly, they arc taking on a large part of the powers related to managing the economy …

Our society has the unconditional right to live better right now, not in the distant future, and the proposed program for the changeover to a market economy is aimed at the fullest possible realization of this right.

Source: Current Digest of the Soviet Press, Vol. XLII, No. 35 (October 31, 1990), pp. 4-7, 12.

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