Law on State Enterprise (1987)

Origins

By the mid-1980s the Soviet economy was beset by slowing growth and chronic shortages of consumer goods. After Gorbachev became general secretary in 1985, the 27th Party Congress of 1986 raised "acceleration" and an expansion of khozraschyot, and the January and June 1987 plenums of the party Central Committee set a course of fundamental restructuring of economic management. On 30 June 1987 the USSR Supreme Soviet adopted the Law on the State Enterprise (Association), No. 7284-XI, which took effect on 1 January 1988. It is regarded as the centrepiece legislation of the perestroika economic reforms.

Main provisions

The law defined a state enterprise as a socialist commodity producer operating according to plan and contracts, on the principles of full khozraschyot, self-financing and self-management. Enterprises drew up their own plans and concluded contracts on the basis of control figures, state orders, long-term economic norms and ceilings, and consumer orders; after fulfilling mandatory state orders they could dispose of the remaining output according to market demand. Ownership and control of the means of production nonetheless remained with the state. The law also required enterprise directors and heads of subordinate units to be elected by the labour collective through open or secret ballot, and recognised the workers' collective council (STK) as a body of self-management. Elected by workers' assemblies, the council could set the main directions of the enterprise's work and oversee the administration.

Outcomes and assessments

Freedom to dispose of output beyond state orders and the relaxation of wage regulation led enterprises to raise wages and bonuses without regard to the supply of goods, and as directors' positions came to depend on the choice of the labour collective, competition in raising wages intensified. With no accompanying price reform, the release of enterprise profits as cash is widely judged to have worsened the monetary overhang, goods shortages and fiscal imbalance. In 1989 the failure of the 1987 reform course was acknowledged and debate began on a transition to a regulated market economy; the law, amended on 3 August 1989, was repealed outright by Law No. 2015-1 of 7 March 1991. The workers' collective councils lost their management powers in 1990 and were mostly dissolved during Russia's privatisation.