Was the Gradual Approach Not Possible in the USSR? A Critique of the Sachs-Woo ‘Impossibility Hypothesis’

This paper examines the Sachs-Woo hypothesis that the gradual approach to reform, though successful in China, was not possible in the USSR because of structural differences between these two economies. To examine this hypothesis, this paper abstracts from the issue of structural differences by focusing on the industrial sector only and compares the state-owned enterprise (SOE) reforms in China under Deng and in the USSR under Gorbachev. Apart from concerning the same sector, these reforms were roughly contemporaneous, and hence their comparison provides a suitable test of the Sachs-Woo hypothesis. The test shows that the hypothesis does not live up to it.