500-Day Program

Background

By 1990 the contradictions of partial reform had accumulated in the Soviet economy. The Law on the State Enterprise and the Law on Cooperatives had widened enterprise autonomy and private activity while prices stayed controlled and supply allocated, so rising wages, shortages, and budget deficits advanced together. In this situation the question of the pace and sequence of transition became the central task of policy.

Political conditions had changed as well. The Russian republic had declared sovereignty and Yeltsin had begun pursuing an economic policy of its own, so any union-level programme required the consent of the republics. The Five Hundred Days programme was drafted by a working group led by Shatalin and Yavlinsky under an agreement between Gorbachev and Yeltsin.

Content

The programme divided five hundred days into four stages and sequenced measures across them. Early stages would cut the budget deficit and begin converting state enterprises into joint-stock companies and selling small businesses; price liberalization would follow in phases; and the final stage would open external economic relations and introduce partial convertibility of the rouble.

Its treatment of state assets was distinctive. The programme envisaged mass privatization by transferring assets to citizens and sought to secure social support for reform by selling housing and small assets first. It also included a design for recognizing republic powers and recasting the union as an economic union.

Failure and legacy

The government under Prime Minister Ryzhkov submitted a gradualist alternative that would keep price controls while adjusting them by stages and preserve the state's coordinating role. Gorbachev backed the Five Hundred Days programme at first, then attempted a compromise between the two, and in the end neither was adopted intact at union level.

Parts of the programme were implemented in the Russian republic, and its design fed into Gaidar's rapid liberalization of 1992. The Five Hundred Days programme is treated as the last comprehensive attempt to sequence a market transition from inside the Soviet system, and it became the starting point of the argument over how the pace of transition and the method of asset distribution determined the economic structures of the successor states. An assessment that rapid transition was necessary stands against one holding that transferring assets without an institutional foundation concentrated wealth in few hands.