Planned Economy Modem socialism has much of its roots in the ideas of Karl Marx (1818-1883), published in 1867 in Das Kapital. Marx believed that workers were being exploited by owners (capitalists) and forced to work for wages that barely allowed them to survive. Capitalists, who owned the means of production, were viewed as a separate, distinct class. According to Marx, capitalists made profits by paying workers less than the value of their production. Socialism The Union of Soviet Socialist Republics (USSR) was born with the Bolshevik Revolution of 1917. Marx's ideas helped shape the economic system adopted by the new nation. The communist leadership set up a centrally planned system that, until 1985, operated without the profit motive. It was a classic example of a planned economy. Prior to major changes in 1989 and 1990, countries such as East Germany, Romania, Bulgaria, and the Soviet Union had planned economies. The governments owned productive resources, financial enterprises, retail stores, and banks. In a planned economy, the government is the owner because it speaks for the people. Personal property, such as autos, clothing, and furniture, is owned by private citizens; however, almost all housing and the means of production are owned by government. In the Soviet planned economy, politically appointed committees planned production, set prices, and managed the economy,8 Each factory received detailed instructions on how many goods to produce. PBrestroika In 1985 Mikhail Gorbachev, general secretary of the Communist party, began a new program called perestroika. Perestroika means economic restructuring- Gorbachev is promoting reduced government control, less direction, and fewer rules. On January 1, 1988, about 60 percent of Soviet enterprises were put on a self-financing basis. The managers of the businesses were asked to decide how much and what to produce. Workers* wages were tied to profits. Under perestroika, those firms not making a profit risk being shut down. This is a new pressure on enterprise managers in the Soviet Union. Perestroika has required the use of better management skills, teamwork, goal setting, and other practices typically unused in the Soviet Union. With perestroika, the prices of many products have increased and have resulted in a high inflation in the Soviet Union (e.g., a Big Mac cost $6-90 in April 1991). In the past, planners set prices so that Soviet citizens who make about $300 per month could afford food and other consumer goods. Under the new system, prices will rise based on supply and demand. In anticipation of the price and inflation problem, the Soviet state has postponed price decontrol until 1992. (未完待续)