PSU Magazine Spring 1989

While enjoying a higher level of in– dustrialization, the Soviet Union that Gor– bachev inherited in 1984 was also reeling from the effects of economic stagnation and political mismanagement. Whereas China has advanced further in economic reform (perestroika), the Soviet Union has allowed a greater amount of political freedom (glasnost). The Soviet Union had experienced several years of negative economic growth and was lagging further and further behind the rest of the world in such key modern industries as communication and high technology. In the realm of politics, government bureaucracies were bloated and corrupt, and the general populace was uninspired and cynical of the Com– munist Party's ability to lead the country. Faced with societies in crisis, Gor– bachev and Deng both saw the need to take drastic action. According to the PSU panelists, the long- range goals of Gorbachev's and Deng's reform movements are very similar. However, the short-term implementation of these reforms have taken very different forms. Whereas China has advanced fur– ther in economic reform (perestroika), the Soviet Union has allowed a greater amount of political freedom (glasnost). One major goal of both reform movements is to move away from rigid centralized planning of the economy and encourage a certain amount of entrepreneurship. In 1978 the Chinese began an experi– ment with the " household responsibility system." Under this system, peasants paid a fixed amount to the state but then were free to grow whatever they pleased and sell it at whatever price they could get. The experiment proved an enormous suc– cess, the government expanded the scope of its program, and by 1984 96 percent of Chinese peasants were involved in the new system and agricultural production nearly doubled. PSU 12 . ti·.--: I • '• • I ... J • • I f l • I . . . . "Exhibition of Farm Tools at a Commune" by Kuo Wen-Shau. Estampes Chinoises. Panelist Gilbert Rozman , professor of sociology at Princeton University, ob– served that the Chinese are quite capable of developing a modern "entrepreneurial class". The Chinese, he said , have thousands of years of experience with small, household enterprises. Moreover, compared to the Soviet Union, the Chinese Revolution occurred so recently that many peasants have retained the skills and the knowledge to operate effec– tively in a household-based (as opposed to a commune or village-based) agricultural system. Another advantage that China has in the development of a modern, entrepre– neurial class is the existence of many overseas Chinese. These internationally– experienced businessmen are eager to in– vest in the mainland and have intimate knowledge of Chinese language and culture. Of the 7,800 joint-ventures licensed in China in 1987, 80 percent were consummated with companies in Hong Kong. In addition to these businessmen there are now 40,000 Chinese students studying overseas (including 20,000 studying in the U.S. and 67 studying at PSU this year) . Upon their return to China, foreign– educated students can contribute their technical know- how and their knowledge of foreign entrepreneurship. The Soviet Union, on the other hand , has moved more slowly towards economic reform. After 70 years of communism, the state planning and production hier– archy is well-developed and resistant to change. Workers are hesitant to embrace any concept that threatens their steady in– come and guaranteed employment. When Gorbachev announced that col– lective farms could sell as much as 30 percent of what they grew for higher prices in open farm markets, the farms sold only 2 percent of their harvest at the higher price. Most farms preferred to sell to a familiar, guaranteed buyer, the state procurement agency. Likewise in Moscow: with a total population of 8.5 million, only 11,000 people submitted applications to open a business after the government authorized private trade on May l, 1987. Professor Rozman argued that the Soviets will have difficulty developing an "entrepreneurial class" in the near future. Unlike the Chinese who have a 2,000 year history of household agriculture, the Russians have a tradition of serfdom. The country is also burdened with planning ministries that wield much more power than the Chinese ministries were ever able to wield, and a work force that lacks first-hand knowledge of entrepreneurship. The Soviet panelists acknowledged these structural and attitudinal barriers to economic reform. Alexander Nagorniy, professor at the Institute of Canada and USA , Soviet Academy of Sciences, com– mented that a concept that seems almost instinctive to many Westerners - the right to own property - "has not caught on yet with the rank and file ." Nagorniy, however, was optimistic about the future of entrepreneurship in his country. He claimed that a strongly refor– mist National Communist Party Congress last summer inspired a "psychological shift" in the Soviet people. Since then , he said , there has been a dramatic increase in the number of people who have joined