A landmark study of the Soviet economy by four international economic organizations, including the International Monetary Fund and the World Bank, has concluded that the Soviet Union should attempt a radical shift to a market economy, according to diplomatic and administration sources.
The report suggests Moscow should try to follow the Polish example of a sudden break with the old command economy, rather than the gradual and sporadic approach to reform that Soviet President Mikhail Gorbachev has been pursuing, the sources said.
The study comes as Gorbachev appears reluctant to undertake more radical reforms, attempting instead to consolidate central control over Soviet society and resisting demands of several republics for independence and more autonomy in economic and political decision-making.
The document, perhaps the most exhaustive study of the collapsing Soviet economy yet undertaken by the West, was requested last summer by the leaders of the seven largest Western industrial democracies at their Houston summit. It was intended to help the Western powers decide how best to assist the Soviet Union and is expected to be delivered to President Bush, who was host to the economic summit, later this week.
In addition to the IMF and World Bank, the study was conducted by the Organization on Economic Cooperation and Development and the newly organized European Bank for Reconstruction and Development, which was set up recently to channel Western aid to the emerging democracies of Eastern Europe.
A source familiar with the overall direction of the report said it paints a gloomy picture of the Soviet system, where central authority is breaking down, leaving a chaotic patchwork of bartering, black marketeering, theft and dislocation.
The document is expected to provide the most comprehensive statistics yet on the size of the Soviet economy and the extent of its distress, which has been much debated in the West. By some Western estimates, the Soviet Union is now going through the equivalent of a severe recession or depression in the United States.
In suggesting that the Soviet Union go the route of Poland, the report urges a crash economic reform program that would be quite different than the piecemeal measures and lengthy debates of the Gorbachev era. Officials confirmed an account published yesterday by the Financial Times of London, which said a draft of the report circulating in Moscow calls for a sharp acceleration of economic reform in the Soviet Union.
The report "will reassure the radical reformers," one official said, referring to those critics in the Soviet Union who have said Gorbachev has not gone far enough in his program of perestroika, or restructuring, and who want to move more rapidly toward a Western-style market economy. The newspaper said the draft offers a wide-ranging set of policy remedies, including strict wage restraint while prices are freed and allowed to shoot upwards, a complete overhaul of the taxation system and much faster privatization of trade, distribution and small businesses.
Such measures would be similar to the "shock therapy" that Poland undertook earlier this year in its effort to leave communism behind. Poland's program included ending price controls and subsidies, privatizing many state-owned factories, instituting freezes to avoid a wage-and-price spiral, creating a sound banking system and setting up a social "safety net" to help those who lose their jobs in the process.
Although the report urges a more rapid shift to a market economy, it also is reportedly based on the assumption that major power over financial and business affairs would remain in the hands of the central authorities. This could run into criticism from the republics, which want greater control over their own affairs and a dismantling of the command system that has centralized in Moscow decisions about prices and distribution.
But many of the report's recommendations for radical and painful changes in Soviet life may be difficult if not politically impossible to implement given the mounting disenchantment over Gorbachev's reform effort among Soviets. In Poland, the changes were politically more palatable because the Solidarity labor union enjoyed credibility in the work force; even so, public anger over some of the measures led to the overwhelming defeat in recent presidential elections of Prime Minister Tadeusz Mazowiecki.
The IMF report is expected to go well beyond the problem of food shortages that have captured the headlines in recent months to examine fundamental questions about the Soviet economy, currency, distribution system, wages, taxation, natural resources and ways in which it could use advice from the West to make the shift to a market system.
The report comes on the heels of Bush's offer last week to provide the Soviet Union with grain credits, medical supplies and technical advice.