Mikhail Gorbachev’s policy of Glasnost was well received among Soviet youth, but his policy of Perestroika, which refers to an attempted restructuring of the Russian economy, was less popular. To understand what happened, it is necessary to understand the Soviet economy. As George Mason economics professor Peter Boettke notes (via FEE), the Soviet economy was centrally planned. A cadre of bureaucrats regulated virtually all parameters for economic activity and destroyed most incentives to innovate. In short, the system benefitted bureaucratic largesse at public expense. Economic success was, at best, difficult without Communist Party patronage.
The CVCE notes that Gorbachev knew this system was untenable against the prosperous, capitalist West, whose fruits were now in plain view under Glasnost. So he introduced elements of market capitalism at the expense of government intervention and subsidies. But as Boettke notes, he did not replace government patronage with any concrete measures to fill the vacuum with private enterprise. Boettke’s solution of economic shock therapy is another debate, but regardless, as History notes, Perestroika produced quite a bit of hardship.
The loss of massive government subsidies that had allowed the Soviet agricultural sector to produce cheaply (but inefficiently) led to skyrocketing food prices. Attempted economic stimuli created inflation without the expected free market economic activity. The worsening economic situation (especially compared to the prosperous West), led non-Russians in the USSR to ask if they were truly better off under Soviet rule. Under Glasnost, they could openly express these sentiments. In the ensuing events, Gorbachev’s Nobel would prove a tad premature.
