The Union: A Long, Mighty Struggle

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The nationalities crisis is also acute in Estonia, Latvia and Lithuania, the relatively prosperous Baltic States that Stalin seized in 1940. Gorbachev initially regarded the nationalist sentiments in the region as a force that he could harness on behalf of perestroika. But he underestimated the resentment. In Estonia last November, the local legislature declared the republic "sovereign," a pronouncement Moscow refused to accept. Residents in Estonia are so fed up with Russians flooding in to clean out their better- stocked stores that they now require customers to produce a passport; only Estonians are allowed to buy appliances, clothing or footwear. The Baltics produced some painful surprises for the party as nationalist candidates notched victories over pro-Moscow rivals.

Another potential problem is the festering unrest in the fertile heart of the Soviet Union, the Ukraine. Gorbachev visited the region in February and lashed out against the disastrous consequences of further nationalist stirrings there, displaying iron teeth rather than the usual smile.

Of all Gorbachev's challenges, his most critical is getting perestroika to produce some tangible economic improvements. At the core of this effort is the Law on State Enterprise, passed almost two years ago, which is designed to lift the yoke of central planning off the back of industry. In theory, factories will no longer have to fulfill Moscow-dictated quotas by churning out products with little regard for cost, efficiency or quality. Instead, factories are supposed to become "self-financing." They will contract with suppliers for materials, be responsible for selling what they produce and be allowed to share in the profit if revenue exceeds costs.

In reality, however, the quotas have been supplanted by "state orders" placed by Moscow's ministries for hefty portions of the output of most factories. The nation's entrenched bureaucrats see change as threatening, and their first priority is to preserve their jobs by clinging to their authority to meddle. That suits most managers just fine, because it means they neither have to hustle sales nor worry about scaring up the necessary raw materials. "A form of perverse social contract exists between the bureaucracy and those people who do not want to work very hard," says Shmelev.

An equally important pillar of perestroika is the encouragement of private agriculture. Gorbachev has long promoted "contract" farming, in which small groups or families enter into an agreement to handle a certain portion of a collective farm's crops, land or livestock. The latest innovation, passed by the Central Committee last month, goes much further: it allows families to take leases of 50 years or more on pieces of land, keep the profit on what they raise and even pass the leasing rights on to their children. Administration of this program, though, will be under the control of the collective farms.