<i> Perestroika </i> in the Marketplace of Ideas : THE ECONOMIC CHALLENGE OF PERESTROIKA <i> by Abel Aganbegyan (Indiana University Press: $18.95; 248 pp.) </i>

Abel Aganbegyan’s “The Economic Challenge of Perestroika,” already required reading for many professionals, will enhance anyone’s understanding of the economic restructuring path the Soviet Union is pursuing. Some may feel that they are already well informed about the twin themes from the Soviet Union-- glasnost (openness) and perestroika (restructuring). But most are more knowledgeable about the former than about the latter.

As for perestroika , it involves comprehensive changes in the economy, and decades will be required for full implementation. An understanding of its scope and implications can be gained from Aganbegyan’s book. He is the chief economic adviser to General Secretary Mikhail Gorbachev.

Three points deserve emphasis here:

1. The comprehensive nature of the restructuring. For example, a change from “extensive” to “intensive” use of natural resources; that is an effort to economize on extraction of iron ore, coal, oil, gas and other minerals rather than permitting “extensive” depletion. A shift in emphasis from heavy industry to consumer goods of high quality. The elimination of shortages of consumer items.

2. Greater reliance on market forces. This will require the introduction of management skills much beyond those necessary when the role of management has been to try to achieve goals set in central plans and supported by government financing and allocation of resources. Using profits as a guide and leaving planning, financing, and procurement and marketing analysis, and all other management functions to business enterprises will require a much broader set of management skills. Acceptance of responsibility to make a profit as a measure of accomplishment is indeed a change.

Reliance on the market reminds one of an old saying, “If you can’t afford an economist, buy a parrot and teach it to say, “Supply and demand. Supply and demand.” Perhaps--but we seldom reflect on the many facets of supply and demand in our own market economy. All market elements are involved--consumption, investment, labor, finance, government, international trade and investment, business organization. Market prices reflecting supply and demand are a critical ingredient. A change such as is contemplated from central planning to a market system could be literally an overwhelming challenge.

Why might it nevertheless be possible? An anecdote in the book suggests an answer. The author relates that he “visited more than 30 enterprises which were undergoing major experiments during 1984-85, and asked workers on the shop floor the question: ‘How’s your experiment going?’ The usual reply was ‘what experiment?’ ” Normal functions continue to be performed even during periods of great change. The lights may still work; the cows are usually milked; and the barber is closed on Mondays.

3. Centralized industrial policy. A third matter that can be implied from Aganbegyan’s book but is not discussed fully is that there will remain a significant element of central economic planning in the society. The market alone would be slow to provide some of the planned changes. The shift to intensive extractive industries, emphasis on consumer goods, more international trade, technology leading to a more productive society, renewed emphasis on cooperatives and more individual entrepreneurs--these are elements of central planning, of “industrial policy.”

There was discussion of industrial policy prior to the 1984 elections in this country, but the notion of encouraging industrial developments in certain directions and away from others never became a real issue. And efforts being considered for the United States were minor compared to changes in direction being contemplated for the Soviet Union.

Let me comment briefly on two other elements from the book: one touches Marxism and profits, the other the relation of perestroika to arms control.

Marx complained in “Capital” that “wherever a part of society possesses the monopoly of the means of production, the laborer . . . must add to the working time necessary for his own maintenance an extra working time in order to produce the means of subsistence . . . for the owners of the means of production . . . .” Marx argued that capitalists try to increase this “surplus-labor” and exploit workers. Aganbegyan makes it clear in his book that this is still the Soviet view: “In the Soviet Union a worker cannot employ others for a wage. We consider this exploitation and it is illegal.” And yet under perestroika , profit--”self-accountable income”--will be used to direct production, yield supplements to workers earnings, provide funds for expenses, finance interest charges and repayment of loans, and provide for capital investment.

How does the Soviet Union resolve this contradiction? It does so by insisting that it is not profits per se that are illegal, or hiring laborers. Instead what is illegal is private hiring of labor for wages. Individuals can create one-person enterprises. Labor can be hired by government enterprises. Furthermore, private enterprise’s use of labor is possible through cooperatives. Cooperatives are organizations in which the participants are the owners of the business. Laborers in cooperatives are owners rather than employees. Their rewards can vary depending on the profitability of the enterprise. Until recently the agricultural cooperatives plus fisheries were the dominant cooperative businesses but an expansion of the cooperative form of business is being encouraged.

Finally, will this comprehensive restructuring of the Soviet economy affect the arms race? Will the Soviet Union be so preoccupied with the economy that the nation will be restrained militarily? Aganbegyan blames the United States for wishing to introduce a new round of advanced--including space--armaments. He concludes that “. . . the fact that the arms race complicates the process of reform and perestroika should not be denied. There is hope that the treaty limiting thermonuclear weapons will liberate resources for peaceful construction . . . . The arms race is unwanted and detrimental to the implementation of our plans. We need peace, progress and international cooperation.”

Hear! Hear!

Aganbegyan’s book is truly informative, an eye opener. It has very little political content and is not so technical as to be difficult. Its opening section on the natural and human resources of the Soviet Union is a reminder of the basic concern of economics--the allocation of scarce resources to meet mankind’s needs.