Latsis: Economic Reform in USSR, page 5
Law on State Enterprise
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The same session approved amendments to the Law on State Enterprise (Amalgamation), promulgated about two years ago. Seemingly insignificant, these amendments are fundamentally important. In particular, enterprises leased out to their work collectives have the right to withdraw from ministries. Factories can withdraw from amalgamations, which is especially important because some of the latter are in fact disguised subdivisions of ministries. Moreover, enterprises are allowed to form voluntarily new amalgamations, concerns and joint-stock societies and associations. This centralism is most welcome because it grows out of the interests of the production collectives themselves rather than being imposed arbitrarily by bureaucrats. Work collectives have the right to choose under which form of cost-accounting to operate, including leasing, joint-stock ventures, etc. Enterprises can enter the securities market, issue stock and draw loans for specific projects. In short, the amendments to the law were a severe blow to the monopoly of ministries and departments. The earlier decisions on improving the country's finances laid emphasis on increasing revenue, which is important, but clearly not sufficient. Current plans aim also at cutting back expenditures, including a substantial reduction - by almost one-third - in centralised state capital investment (but not in the outlays made by enterprises themselves), real reductions in defence spending and administrative costs, a war on losses and squandering, austerity measures in the national economy, etc. For example, in 1990 state expenditures on new construction in the production sector will be cut by an average of 30%, and even by 40% in some industries. Purchases of consumer goods will be increased simultaneously: almost 32 billion roubles' worth (in retail prices) will be supplied to the domestic market, It is planned to import 2 billion roubles' worth of medicines and 1.6 billion roubles' worth of raw and other materials for the light industry. The easiest way out, of course, is to boost such imports even more with the help of large Western credits. But since the country's external debt has reached 34 billion hard-currency roubles (the figure was first made public at the Congress of People's Deputies of the USSR in June 1989), such credits would make our debt unmanageable. Debt-servicing would be a real burden, and we would have to export more than we import. I think that we are already close to the safety limit, and large loans would be destabilising. Changing the structure of imports seems to be a better option. The plans are to cut purchases of equipment for heavy and other industries, which already have a backlog of unused hardware worth hundreds of millions dollars; to cut grain imports (roughly $7.5 billion went on around 38 million tons in 1988) and to pay some of the hard currency thus saved to our own grain growers. I am glad to say that the latter measure was put into effect last August in response to suggestions made at the Congress of People's Deputies of the USSR. Collective and state farms are paid in hard currency for durum wheat, legumes and oil-bearing seeds brought in over and above the average 1986-1988 yields, and are free to spend their earning as they see fit.
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