Soviets Resist `Perestroika'

Russian Official Speaks on Economic Troubles

Recent efforts to modernize the USSR's ecomomy face significant resistance from government officials and entrenched interest groups, a noted Soviet economist told an audience of approximately 60 people in Coolidge Hall yesterday.

Much of the strongest resistance to "perestroika"--General Secretary Mikhail S. Gorbachev's policies of reform--has come from the interest groups within the Soviet government, said Nikolai Shmelyov.

Shmelyov, a member of the Institute of Economics of the Soviet Academy of Sciences, last year published an article in the Soviet journal Novy Mir that criticized efforts within the Soviet government to hinder Gorbachev's economic reforms.

Shmelyov, said the division that Gorbachev's policies have generated was between the "decent"--whom he said support it--and the "undecent," between the "intelligent" and the "unintelligent."

"In some sense, we are trying to change the whole way of our life," Shmelyov said. "The changes in our country that are going on now are really serious, perhaps revolutionary," he said.

Shmelyov is participating in a program organized by the Russian Research Center that brings Soviet economists to Harvard to discuss contemporary economic issues in the USSR.

`Pre-crisis State'

Prior to Gorbachev's ascension to power, Shmelyov said the Soviet economy had reached a "pre-crisis state" because it had seen no growth from 1977 to 1984. He attributed this economic paralysis to the government monopolies on production, a dearth of incentives for workers and the government's disinterest in encouraging technological innovation.

Shmelyov said that restructuring the Soviet economy will require "a far reaching change in the mentality of our economic managers." He said such a change will not be easy because "it's very difficult to change people's brains."

The USSR also desperately needs to reorganize its agricultural system, Shmelyov said.

He said that large collective farms, which were set up in the 1930s under Stalin, have "outlived themselves." He predicted that they will eventually be replaced by smaller collectives and small family farms.

Although Shmelyov said he believes that smaller collectives will emerge in the agricultural sector, he said the Soviet people are probably too resistant to change to allow similar reforms in other areas of the economy.

For example, the Soviet people would not support the rise of small independent business ventures even though they may be necessary to spark that country's economy, according to Shmelyov.

"The very night this enterprise is organized, this very night it will be burnt by people from the street," he predicted.

Shmelyov said that the Soviet currency was another aspect of the Soviet economy in great need of reform.

He said that it is necessary to make the ruble at least partially convertible to other currencies to better integrate the Soviet Union into the world economy.

Toward this end, the Soviet government should make intensified efforts to enter the world's financial markets, Shmelyov said.

Although Shmelyov said the government needs to borrow up to $50 billion to help its ailing economy he said Soviet officials have resisted such measures because they do not want to "leave debts to our grandchildren." This comment prompted one audience member to shout, "They need a few lessons from Reagan."

The USSR should also move its manufacturing priorities away from industrial production and toward developing high technology, Shmelyov said.

He noted that the Soviet Union currently produces six times as many tractors as the U.S., two-and-one-half times as much steel and more than 800 million shoes but is not competitive in producing advanced technological equipment.