PowerPoint Presentation

Key Legislative Reforms - new property and organizational forms cont.

•Reform of State Enterprises and Cooperatives

–Jan. 1988 - Law on State Enterprises enacted

•Decentralized management

•Increased autonomy

•Increased flexibility of state enterprises

1.Autonomy increased for firms to set production targets

2.Conflicted with persistence of compulsory state orders (goszakazy)

– state orders still accounted for 90% of production in 1988

3.Allowed workers’ voice in selection of management (ex. RAF - IGRA)

–1988 Law on Cooperatives

•Created powerful incentives for state enterprises to create cooperatives

•Exempted Coops from compulsory plan assignments

•State firms created profitable sideline business without direct central governmental control and influence

•Coops granted significant freedom to set wages and prices (e.g., directors set own wages and that of allied nomenclatura workers

•Allowed creation of Coop banks

•Coop banks increased financial flexibility of founding state enterprise “koop” partners

•By beginning of 1991 80% of all Soviet Coops where kooperativy pri or attached to state enterprises & produced 80% of total goods and services sold by coops