Law on Cooperatives in the Soviet Union

Law on Cooperatives in the Soviet Union
Short title	Law on Cooperatives
Legislature	Supreme Soviet of the Soviet Union
Long title	Law of the Soviet Union on Cooperatives
Enacted by	Supreme Soviet of the Soviet Union
Date enacted	May 26, 1988
Status	Repealed

Law on Cooperatives in the Soviet Union. The Law on Cooperatives, enacted on May 26, 1988, was a landmark piece of perestroika-era legislation under Mikhail Gorbachev that fundamentally restructured the Soviet economic system. It legalized and promoted private cooperative enterprise, marking a radical departure from the principles of the centrally planned economy and the ideological dominance of state-owned enterprise. This law catalyzed the emergence of a nascent private sector, directly influencing the economic history of the Soviet Union and accelerating the socio-economic transformations of the late 1980s.

Historical Background and Legal Precedents

The cooperative movement had a complex history within the Russian Empire and the early Soviet Russia, notably under Vladimir Lenin's New Economic Policy which temporarily permitted small-scale private and cooperative activity. Following the Stalinist consolidation of power and the implementation of Five-Year Plans, cooperatives were largely subsumed into the state apparatus or abolished, with the collectivization of agriculture creating kolkhoz and sovkhoz structures. Prior to the 1988 law, the Soviet economic reform of 1965 and the era of stagnation under Leonid Brezhnev maintained strict prohibitions on private productive enterprise. The deepening Cold War economic competition and the failures of the command economy, highlighted by crises like the Soviet–Afghan War, created pressure for systemic change, leading Nikolai Ryzhkov and reformist economists like Leonid Abalkin to advocate for radical measures within the framework of uskoreniye.

Key Provisions and Legal Framework

The law established cooperatives as legal entities independent from state enterprises, granting them the right to determine their own activities, set prices based on market conditions, and manage their income after taxes. It permitted cooperatives to engage in nearly all sectors except those prohibited by law, such as defense production. Key provisions included the ability to hire labor from outside the founding members, a controversial point that critics equated with exploitation under capitalism. The legal framework was overseen by the Council of Ministers of the Soviet Union and local soviets, but mandated non-interference in operational decisions. Financial regulations allowed cooperatives to open accounts with the State Bank of the USSR and to conduct transactions with foreign firms, integrating them into the broader, albeit limited, foreign trade of the Soviet Union.

Types of Cooperatives and Their Functions

The legislation spurred a diverse array of cooperative forms. Consumer cooperatives, often extensions of the old Centrosoyuz system, expanded into retail and services. Production cooperatives became the most dynamic, operating in light industry, manufacturing, and construction, directly competing with state industrial ministries. A highly visible and profitable sector was public catering, with cooperative cafes and restaurants appearing in major cities like Moscow and Leningrad. Others ventured into scientific and technical services, effectively commercializing research from institutions like the Academy of Sciences of the Soviet Union. In the later stages, some cooperatives evolved into early forms of commercial banks and joint-stock companies, laying groundwork for post-Soviet privatization in Russia.

Impact on the Soviet Economy and Society

The law triggered a rapid, though uneven, expansion of the cooperative sector. By 1990, millions of citizens were employed in cooperatives, which contributed a growing share of the national product. It alleviated some shortages of consumer goods and services, from clothing to home repairs, that the Gosplan system failed to provide. Socially, it created a new class of wealthy individuals, the so-called "cooperators" (kooperator), which included figures like Artem Tarasov, the first publicly declared Soviet millionaire. This new economic stratification exacerbated social tensions and fueled public debate about inequality, contrasting sharply with the stated ideals of the Communist Party of the Soviet Union.

Criticism and Controversies

The cooperative movement faced fierce opposition from conservative nomenklatura within the Politburo, such as Yegor Ligachev, who denounced it as a restoration of capitalism. Many cooperatives were accused of profiteering, black marketeering, and diverting resources from state enterprises, leading to epithets like "speculation." There were widespread reports of corruption, with cooperatives serving as fronts for organized crime or as laundering vehicles for shadow economy funds. The ability to set high prices, during a time of general scarcity, made them deeply unpopular with much of the populace, contributing to the political crisis that culminated in the 1991 Soviet coup d'état attempt.

Dissolution and Post-Soviet Legacy

The Law on Cooperatives was effectively superseded by the dissolution of the Soviet Union and the subsequent radical economic reforms in the newly independent states. In the Russian Federation, the principles of the law were transitioned into the commercial code underpinning shock therapy and mass privatization under Acting President Boris Yeltsin and Yegor Gaidar. Many successful cooperatives transformed into the first generation of post-Soviet corporations, banks, and business oligarchies. The law remains a critical subject of study for understanding the legal origins of Russian capitalism and the complex transition from the planned economy to a market economy.

Category:Economic history of the Soviet Union Category:Perestroika Category:Soviet law Category:1988 in the Soviet Union