GORBACHEV'S CHALLENGE

Economic Reform in the

Age of High Technology

By Marshall I. Goldman

Norton. 296 pp. $16.95

A GIANT reconstruction project is under way in Mikhail Gorbachev's Russia. The new Soviet leader has been asking his people to roll up their sleeves and make the country over. He wants to modernize Soviet society. There is no doubt that the eventual outcome, whatever it may be, will have profound consequences not only on the world's second superpower but for global politics in general.

The Soviet economy is the heart of Gorbachev's enterprise. Despite significant successes in the past, the command economy in the 1980s has revealed itself to be inefficient, both socially and economically. It offers its citizens a second-class standard of living and a first-class military might. Underlying the quest for reform is the fear that Russia may fall behind more dynamic Western societies and that its military might could be endangered if it fails to absorb and exploit the computer, the basic tool of the new technological age.

Few Western specialists are so well equipped to analyze the soviet economic scene as Marshall I. Goldman, professor of economics at Wellesley College and associate director of the Russian Research Center at Harvard University. His previous works have dealt with Soviet issues ranging from ecology to energy as well as the fundamental problems of the command economy. Now Goldman has produced a superb book on the prospect for economic reforms in the Soviet union.

Gorbachev's Challenge, in fact, addresses the larger question of reforming a centrally planned economy not only in Russia but also in the rest of the communist world. The real challenge was most succinctly stated by a Chinese expert, Huan Xiang, who noted that "the more centralized, the more rigid the economy, the lazier the people, the poorer they are, and the poorer the people are, the greater the need for centralization, forming a vicious circle" from which it is not easy to break out. Goldman provides an excellent survey of the ways various reformers sought to deal with this problem in China, Hungary and East Germany. The Hungarians, for example, opted for decentralization and market instruments, China under Deng Xiaoping took a more radical course -- it does not seek an increase in heavy industry and military power (at least in the short run) but rather an increase in the economic well-being of all segments of the population, especially those who are willing to work to enrich themselves. The East Germans, on the other hand, took an entirely different course, seeking successfully to make central control and planning more effective.

Because of its size and the entrenchment of its Stalinist model, the Soviet economy is far more resistant to innovations and reforms. Those of Gorbachev's predecessors who attempted to make radical changes have had uniformly poor results. But, Goldman says, "if anyone is to break the Soviet Union out of its trap, Gorbachev appears to be an excellent choice to do it." Goldman believes that the Soviet leader's present course -- rejecting either pronounced centralization or decentralization but incorporating elements of both -- would probably produce a higher living standard for the population. But in the absence of major structural changes soviet technology would likely find itself falling farther and farther behind that of the rest of the world. For a switch to high-tech is made even more difficult by the short life-span of such technology. And Moscow's reliance on imported Western technology is bound to become counterproductive over the next few years. "The blind copying of the latest scientific and technical ideas," as the former president of the Soviet Academy of Sciences put it openly, "is often what leads to our falling behind."

GOLDMAN offers a few suggestions of his own. He believes that the reformers would have to begin with securing more and better quality food. This could be done by allowing the peasants to increase the size of their private plots and extend their private trading activities. Goldman says that both urban and rural dwellers should be allowed to engage in private handicraft and manufacturing. The antiquated tax system should be modernized and used as an economic tool. He would also gradually introduce market-set prices, break up the monopoly of the state bank (without introducing private banking) and seek a reduction in the role of the central planners while increasing the authority of industrial managers. In essence, central planners would retain control over the "commanding heights" while the price and market system would acquire a growing role in the economy. Goldman says that some of these ideas have been advocated by Soviet experts, albeit not as a package. Such a package, while difficult to implement, would allow the Soviet Union to share successes of the world economic system, but it would also cause it to share in its failures as well.

Goldman's book is essential reading for anyone interested in the Soviet Union. If Gorbachev's pragmatic new people are at all what they are cracked up to be, they would do well to arrange for a private translation of this work -- and read it. :: Dusko Doder, a foreign correspondent for U.S. News & World Report, is the author of "The Yugoslavs" and "Shadows and Whispers: Power Politics Inside the Kremlin From Brezhnev to Gorbachev."