Mikhail Gorbachev gave an extraordinarily open personal report on his problems with "perestroika" in a Kremlin meeting with Secretary of State James Baker III on Thursday, according to a high-level American official who was present.

Talking non-stop for nearly an hour _ epitomizing the "glasnost," or openness, he espouses _ Gorbachev covered everything from his personal problems in battling bureaucrats to his dreams for a new kind of Soviet economic order, built on competitive prices rather than government fiat.

"We want to restructure our military expenditures and devote a lot more to (the) economic sector," the official, who took elaborate notes, quoted Gorbachev as saying.

"While it's a difficult task, we think it's something that needs to be done."

The Russian word "perestroika" translates loosely to English as "restructuring," and is the word Gorbachev has chosen to describe his efforts at building a modern political and economic state in the Soviet Union, which has fallen far behind the West and Japan in standards of living.

Gorbachev told Baker that he felt he was involved in far more than a "reform" program in the Soviet Union, a term often used in the Western media.

He said he was involved in a revolution, but clearly means to make it a peaceful revolution.

The Gorbachev presentation occupied a large segment of a three-and-a-half hour meeting in the Kremlin during a two-day Baker visit to Moscow.

Later in the same meeting, Gorbachev unfolded his dramatic plans for a unilateral cut in short-range nuclear warheads and new proposals for conventional arms reductions.

In his report on perestroika, however, Gorbachev told Baker of plans for large scale programs to expand the production of consumer goods in the Soviet Union, the official said.

Shortages in consumer goods have given Gorbachev major political problems.

And he said that major efforts are planned to try to apply lessons learned in the defense and science fields to civilian production.

Gorbachev made clear, according to the official, that sooner or later he will have to replace current price controls on consumer goods with a new price system that is more reflective of actual costs. But, he said, such reform may be a long time coming.