Reflections on perestroyka and the foreign economic ties of the USSR

Bela Balassa

No 149, Policy Research Working Paper Series from The World Bank

Abstract: The exploitation of the Soviet Union's foreign trade potential would necessitate adopting a realistic exchange rate and increasing the foreign exchange retention quotas for direct and indirect exporters. It would also require reforms of domestic policies. The first prerequisite is the establishment of rational prices. Eventually, world market prices would be brought to bear on domestic prices in conjunction with the liberalization of imports, but this will be a long process since the pent-up demand for imports, cannot be satisfied from available foreign exchange. It would further be necessary to decentralize decision making on foreign trade in enlarging the scope of firms that can directly trade abroad. The decentralization of decision making in foreign trade should be accompanied by decentralization in the domestic economy, to be complemented by the introduction of the profit motive and competition. In fact, rational prices, decentralization, profit maximization, incentives to managers, and competition are interdependent, and they will have to be pursued simultaneously for efficient resource allocation.

Keywords: Environmental Economics&Policies; Economic Theory&Research; Access to Markets; Markets and Market Access; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT (search for similar items in EconPapers)
Date: 1989-01-31
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