Soviet Prime Minister Valentin Pavlov told the population of his impoverished country to prepare for sweeping price increases of 60 percent or more.
He said that his government regretted the price rise on food staples and children's needs, but that "prices must resemble the real value of things."Even the communists who are reluctant to let go of the old order recognize that the main achievement of socialist planning was an irrational economy that wasted the once-abundant valuable resources of the Soviet Union while leaving the bulk of the people mired in poverty.
Instead of permitting labor markets to price labor and goods markets to properly value products, the Soviet planners held down wages and then compensated people by making bread and housing available at subsidized prices.
For decades the low price of Soviet bread was a mainstay of communist propaganda. Indeed, the price was so low that farm workers fed baked bread to livestock because it was cheaper than the raw grain.
It is not easy to move from such an irrational economy to one that works. The Soviet people have acquired a set of property rights, such as their entitlement to subsidized bread, that have to be taken away. The reduction of subsidies also threatens their jobs, as many state firms run at a loss. Now many ordinary Soviets - including those fed up with their ridiculous economy - see "marketization" and "privatization" as dispossession of their traditional rights.
If the Soviet economy is to be successfully reformed, the people will have to be given new property rights as substitutes for the subsidies that have sustained them over the decades. To take away the latter without a quid pro quo could easily result in resistance and bloodshed.
Behind the Soviet economic failures and political struggles lies the unresolved problem of property. Who are going to be the owners? The virtual absence of legal private property rights gives the Soviet Union an unusual opportunity to disperse property rights widely and to escape the high taxation made necessary by the expensive welfare systems in the West.
Land and farm machinery can be given to those who currently are employed in agriculture, with rights to purchase additional land. State firms can be turned into joint stock companies and shares issued. Some of these shares can be given individually to workers and managers and more turned over to mutual or social funds that, in turn, issue shares equally to the population. The remaining shares could be sold.
The wide distribution of mutual fund shares would provide each individual with his or her own safety net encompassing retirement, unemployment and disability benefits. Moreover, these holdings could be passed on to heirs.
Even some of the Soviet reformers say that such a grandiose plan is too vast to be manageable. However, it is easier to give people property than to take it away from them, and Lenin and Stalin succeeded in their grandiose scheme of taking the property away.
Moreover, a pell-mell privatization is already under way. The process is similar to the enclosures that created private property out of feudalism: Those who are accustomed to wielding power and who are energetic are simply claiming state property for themselves.
For example, a state company becomes a cooperative controlled by the local brass, who create a new bank that becomes the owner of what had been state property. These de facto or unofficial privatizations are widespread. Even the special Soviet troops known as Black Berets have created a private security firm that sells its services.
These unofficial privatizations, of course, benefit the Soviet nomenklatura who have long controlled state resources and budgets and grown rich by diverting them to private uses. For the political aristocracy to go one step further and claim the property itself is only natural.
(Paul Craig Roberts is the William E. Simon professor of political economy at the Center for Strategic & International Studies in Washington and is a former assistant secretary of the U.S. Treasury.)