MOSCOW -- The state of the Soviet economy satisfies no one. Its two chief defects are clear -- the monopoly enjoyed by the producers, given a general shortage of goods, and the lack of interest on the part of manufacturers in scientific and technical progress.

Persistent, long-term efforts to overturn the objective laws of economic life and crush the age-old natural incentives to work have brought results directly opposite those which we had anticipated. We now have an economy which is out of whack and plagued with shortages, an economy which rejects scientific and technical progress and which is unplanned and -- if we want to be totally honest -- unplannable.

Massive apathy, indifference, theft and disrespect for honest labor together with aggressive envy toward those who earn more -- even by honest methods -- have led to signs of virtual physical degradation of a significant part of the people as a result of alcoholism and idleness. There is a disbelief in the goals and intentions which have been declared, disbelief in the possibility of a rational organization of economic and social life.

For a long time, agricultural growth rates have been less than one percent per year, and in some years we had to use a minus sign to indicate our progress -- even though the government has been making mind-boggling investments in this area. We must ask ourselves: Why are we paying these enormous sums? Can it actually be a fear of market relations? Or perhaps a very thin layer of our leading agricultural cadres need somehow to justify their existence?

The degradation of the countryside has progressed so far that it is unlikely that any measures conceived within the framework of the existing system will do any good. We must finally decide what is most important to us: to have enough of our own agricultural commodities or eternally pacify the loudmouths who would see us all equal in our poverty.

We must call things by their proper names: foolishness as foolishness, incompetence as incompetence, Stalinism in action as Stalinism in action. Perhaps we will lose our ideological virginity, but it now exists only in the fairytale editorials of the newspaper.

The present system of material incentives for conscientious work is ineffective not only because it is worthless. Salaries and bonuses don't work because there is nothing for the people to buy with their money. We need to permit companies and organizations to sell freely, to buy and borrow from their reserves so as to create a powerful and vibrant goods market. In place of fruitless efforts at central planning of our entire industrial production (some 24 million items) we should introduce contracts between supplier and consumer.

We need to realize that there is such a thing as natural unemployment among people who are looking for work or changing their places of employment.The real possibility of losing one's job, of being shifted to a temporary unemployment subsidy, or being forced to move to a new place of employment is not at all bad medicine to cure sloth and drunkenness. Many experts consider that it would be cheaper to pay temporary unemployment compensation than to keep on a passel of loafers who can (and do) ruin any efforts to raise efficiency and quality.

The new economic policy of the 1980s must not sidestep the industrial ministries. There is such a disgusting proliferation of them and they are so top-heavy with administrators that they frequently have to invent something to do and actually end up interfering with the work of the enterprises. Lenin once wrote: "Everything is sinking in the lousy bureaucratic swamp of the ministries. The ministries are all s - - - , and so are their decrees."

The most difficult problem in organizing the economy on a totally bottom-line basis is readjusting prices. This is an exceptionally delicate question -- partly because this will involve significantly raising prices of foodstuffs and housing. Soviet consumers are now receiving a subsidy of more than 50 billion rubles from the treasury. Why should they not receive this money in the form of a salary raise instead? Why underpay for meat while overpaying for yard goods and shoes? We will have to talk to people honestly, as was done in Hungary, where a major public-relations effort was launched in 1976 to help introduce new prices painlessly.

The economic situation of enterprises and cooperatives will have to depend directly on profit, and profit cannot fulfill its function until wholesale prices are liberated from subsidies. Over the centuries humankind has found no more effective measure of work than profit. Our suspicious attitude toward profit is a sort of historical misunderstanding, the cost of the economic illiteracy of people who thought that socialism would eliminate profit and loss. In point of fact, the criterion of profit under socialism is in no way tainted; it simply tells whether you are working well or not.

We have resolved to create undertakings using foreign capital. It is even possible that we should consider creating free economic zones. Another prejudice is the rejection of the stock company. Why should the savings of our citizens and enterprises not be used to create new undertakings or expand old ones? Can it really be that the country is better off hoarding this money in a stocking?

I am convinced that our economy is in need of a financial reform of no less depth and scope than in the early 1920s. Money, prices, incomes, credit, budget, government borrowings and the resulting government debt are all questions which we have not even begun to discuss on a serious basis. In the meantime the defects of our current financial system are obvious: the magnitude of deferred consumer demand, a budget full of tax loopholes, inflationary methods of financing, loans which are never to be repaid.

Finally, we have the problem of quality. Good quality is not so much a problem of conscientious work as it is a problem of production and management -- areas which are the responsibility of the leadership, not the worker. According to our more "patriotic" assessments, only 17 to 18 percent of the production of our manufacturing industry meets world standards, while more cautious and pessimistic assessments run to 7 to 8 percent.

Only a gradual weakening and, ultimately, a total elimination of the manufacturers' monopoly will result in anything really new. Consumers need to have both rights and opportunities to take what is offered or turn it down. That means they have to have a real choice. And the producer must be faced with the real possibility of loss and even total bankruptcy if the goods he produces cannot be sold.

It is time to stop deceiving ourselves, stop believing the office ignoramuses and calmly admit that the problem of "consumer selection," the problem of competition, is not rooted in any social or class relationships. There is no room here for even a whiff of ideology. This is a purely economic, even a technical-economic problem. Bottom-line market stimuli must extend to all stages of the process -- "research-development-investment-production-marketing-service." Only the marketplace, and not mere administrative innovations, can subordinate this entire chain to the demands of the consumer.

Who is going to drum into the heads of our managers that the time of administrative methods is passing and that economics has its own laws which are just as terrible to violate as the laws of the atomic reactor in Chernobyl? ? Who will break our managers, especially the high-level ones, of their feudal ideology, caste-like haughtiness, confidence in their own invulnerability and "God-given" right to command? Why should they think that they are above the law and immune to all criticism? What we need here is glasnost and democracy.

Nikolay Shmelyov is a Soviet author. This article appeared in the June 1987 issue of the Soviet journal Novy mir. It was excerpted and translated by John Glad, professor of Soviet studies at the University of Maryland and former director of the Kennan Institute for Advanced Russian Studies.