Discussed at the Twenty-Seventh Party Conference in 1986, perestroika was Mikhail Gorbachev
's policy of reform (economic
) in the Soviet Union
in an attempt to save the floundering economy. It became the unintended catalyst that eventually caused the collapse of the system it aimed to preserve.
"The main idea of our strategy is to unite the achievements of the scientific-technical revolution with a planned economy and to bring into action the entire potential of socialism."
Party Plenum of January 1987
We should realize from the off that this was not an attempt to turn the Soviet Union into a capitalist state (Deng Xiaoping's economic reforms in China aimed to do this to China), but simply to reform within the system. Much like the Reformation, the heretics set out to reform their beloved system and ultimately destroyed it.
Nor should this be seen purely as economic in its goals (especially when partnered with glasnost) -
"The final goal of perestroika, it seems is clear: a profound renewal of all aspects of the nation's life, imparting to socialism the most contemporary forms of social organizations, and the most complete disclosure of the humanitarian character of our society in all its decisive aspects--economic, social-political, and moral."
Gorbachev made efforts to change the very heart of Russian culture. He initiated a crackdown on alcoholism in an attempt to increase productivity and stressed the need for discipline among workers. This was initially actually quite successful1 and output grew. He also sacked Party and industry officials in various areas, with positive results.
The main foreign policy impact of the reform was the realization that the Soviet Union needed to cut defence spending. They pulled out of Afghanistan and decided to negotiate with the United States about arms reductions. The so-called "Sinatra Doctrine"2 called for non-interference in the other countries of the Soviet bloc, which were quick to initiate democratic reforms. In 1989 the Berlin Wall came down.
One of the main aspects of perestroika was decentralisation - he meant to take responsibility for industrial planning away from Gosplan, the state planning agency, and hand it over to the industries themselves. Once responsibility had been given to the industries, they received accountability as well - they would have to make a profit and actually respond to demand. If they didn't bow to consumer sovereignty, they would be closed down! No more state subsidies to keep them going whatever happened.
Firms were also given the right to enter foreign markets without going through the Ministry of Foreign Trade, and there was democracy brought about in workplaces: managers and foremen were from now on voted into their position of power by the workers. This all spelt liberalisation for Soviet industries, and democratization of the Party, but within the existing Socialist system.
Furthermore, by 1987, foreign companies were allowed to set up shop on Soviet soil in joint ventures. At first restrictions on who could work in them were a bit silly - only students and pensioners allowed - but eventually everyone was allowed to be employed by them, and by 1990 foreigners were allowed to run these ventures with no state intervention.
It might have been interesting to see what developed had perestroika not being eclipsed by the collapse of the Soviet Union, which rendered it obsolete. The command economy of the Union did begin to be dismantled, but the market-oriented institutions put in place were ineffectual and caused a lot of hardship for a lot of people. Ministers grappled to retain their power and industries generally found that the risks associated with venturing into the market weren't worth it - why power when you could stick to state supply channels, which not only guaranteed you inputs but ate up your outputs?
Moving from a command economy to a market economy is not at all easy, and Gorbachev wasn't even commited to doing this thouroughly. He didn't really know what he wanted, and he had numerous plans drawn up in his final years in power, none of which he implemented successfully. When he finally lost power it was partly because he was floundering, unsure of what to do. He knew things needed changing, just not how to go about doing it.
Gorbachev lost power after a Communist coup which wanted to return to the old ways. Boris Yeltsin had been elected president of Russia in June of 1991, and after an aborted coup in August, Gorbachev resigned on December 25. The Soviet Union ceased to exist, and was replaced by a Commonwealth of Independent States, which is really just a symbolic organization with no real power.
1. See alcoholism in Russia for the current, discouraging situation in this area.
2. So called after the Frank Sinatra song "My Way".