On this date, Mikhail Gorbachev was chosen as General Secretary of the Communist Party of the Soviet Union (CPSU). He inherited a centrally planned economy facing stagnation, shortages, and low productivity. His leadership change set the stage for the reform period later labeled perestroika (restructuring).
Gorbachev’s early economic message emphasized uskorenie (“acceleration”)—a push to speed up growth through discipline and modernization rather than a full market shift. The goal was to revive performance within the existing planned system. This approach soon ran into limits, helping drive later, deeper reforms.
Reforms to foreign-trade administration began shifting some trade authority away from specialized state foreign trade organizations. Selected ministries and enterprises received direct rights to conduct foreign trade and retain part of hard-currency earnings. This change was meant to make imports and exports more responsive to real production needs, but it also weakened centralized planning tools.
The Soviet government adopted rules allowing joint enterprises with foreign participation (often called “joint ventures”). This was a major step away from strict state control of international business relationships. It aimed to attract technology, know-how, and hard currency, but it also introduced new tensions over ownership, pricing, and control.
A key reform law sought to reduce detailed central micromanagement by giving state enterprises more responsibility for results. In theory, firms would operate with more khozraschyot (self-financing), meaning they had to cover costs and could keep some profits. In practice, partial autonomy without full price reform often worsened shortages and encouraged bargaining and favoritism in supply networks.
The Law on Cooperatives allowed worker-owned cooperatives to operate in services, manufacturing, and some trade—an important opening for legal profit-making outside the state sector. Cooperatives helped meet consumer demand where state supply failed, but they also fueled anger about “speculation” because prices could rise far above state-set levels. This reform widened the gap between a rigid price system and increasingly market-like activity.
At the 19th All-Union CPSU Conference, leaders argued that political changes were needed to make reforms work. The conference endorsed steps toward more competitive elections and new governing institutions, reducing the Party’s monopoly over decision-making. This mattered economically because it increased public scrutiny and political conflict around prices, shortages, and ownership reform.
After rapid cooperative growth and public complaints about high prices, Soviet authorities began tightening limits on what cooperatives could do. Restrictions targeted activities seen as “middleman” trade and other forms of profit-making that looked like resale rather than production. These reversals reduced confidence in the reform direction and signaled growing resistance to market mechanisms inside the state.
The Supreme Soviet approved a property law that recognized forms of property beyond exclusive state ownership, including citizens’ property and collective property. Although language often avoided the term “private property,” the change widened legal space for non-state business activity. This reform was a turning point because it challenged a core pillar of the classic Soviet planned economy.
A reform blueprint known as the “500 Days Program” proposed a rapid transition toward a market economy, including major decentralization and privatization steps. The plan highlighted how far policy discussions had moved from “improving” central planning to replacing it. Disagreements over speed and control deepened conflict between the union center and the republics.
The government abruptly withdrew 50- and 100-ruble notes from circulation, giving citizens only a short window to exchange them. The stated aim was to curb the shadow economy and inflation, but the move also triggered panic and further undermined trust in economic management. It signaled that authorities were turning to emergency administrative measures instead of coherent market reform.
The government raised prices on many goods and services, including sharp increases in everyday items and public transport. Officials argued the hikes were needed to reduce budget pressure from subsidies, but shelves often remained empty, so living standards fell quickly. The shock contributed to strikes and political instability during the Soviet Union’s final year.
From August 19–21, hard-line officials formed an emergency committee and tried to seize power, aiming to stop reforms and prevent a new union treaty. The coup collapsed within days due to resistance and weak support. Its failure badly weakened central authority and accelerated the break-up of the planned-economy state structure.
Leaders of Russia, Ukraine, and Belarus signed the Belovezha Accords, stating that the USSR no longer existed and creating the Commonwealth of Independent States (CIS). This political decision made it impossible to restore a unified Soviet planning system across the republics. It marked a decisive shift from attempted reform of the Soviet economy to the creation of separate national economic policies.
The Soviet of the Republics (an upper chamber of the USSR Supreme Soviet) adopted a declaration ending the Soviet Union as a state. By this point, the planned economy’s central institutions could no longer effectively set production targets, allocate supplies, or enforce a unified budget across republics. The dissolution closed the perestroika era by ending the state that had run the Soviet planning system.
Perestroika Economic Reforms and the Soviet Planned Economy's Dissolution (1985–1991)