Mikhail Gorbachev’s new economic reform program is destined to fail. At the crucial moment, he flinched; it is not wholly clear why. For the moment, a historic opportunity to reform the economy, with far-reaching renovation of Soviet society, has been lost. But that opportunity may come again, for it is certain that even worse political and economic chaos will follow. And that may force Mr. Gorbachev to accept what he now rejects—unless a military coup removes him from the scene.

Although Mr. Gorbachev’s program incorporates many features of the radical free-market reform plan advanced by Prof. Stanislav S. Shatalin, it dodges the key point. The plan would have destroyed the old power center and replaced it with a new one that could have gained popular allegiance. This was to be accomplished by transferring economic powers to the republics and concurrently delegating those powers to a newly created central organ: the inter- regional economic committee.

Mr. Gorbachev still relies on the discredited existing power structure, based on the Communist Party and central decision-making. Because of its commitment to power and privilege, it cannot manage change and can never regain public confidence.

On Oct 1, Mr. Gorbachev was given emergency economic powers. If the 15 republics voted similar powers to their representatives, the inter-regional committee would be able to create an economic federation on a new basis. This was a brilliant idea. The committee would have gathered popular support by battling the hated bureaucracy. It would have severely curtailed the Government budget and spearheaded privatization.

An independent central bank for the whole country, patterned after our Federal Reserve system, would have been set up. Neither the central nor republics’ governments would have been allowed to finance their deficits by borrowing directly from it. With the establishment of firm fiscal and monetary policies, the ruble would have been turned into convertible currency: the essential first step toward a market economy.

The Shatalin plan was far from perfect: it risked runaway inflation and unemployment. But the authors argued that before removing consumer subsidies and asking the populace to make sacrifices, the central authorities must sell off such state assets as lands, vehicles, buildings and businesses to private citizens. Mr. Gorbachev seemed to understand their logic, and sided with the plan in parliamentary debate. At the last minute, the bureaucracy prevailed. Mr. Shatalin, traveling in the U.S. could not make his case in person.

The bureaucracy argued that Mr. Gorbachev, as the sole committee member without the backing of any republic, would have become too dependent on his rival Boris Yeltsin, the Russian Republic’s president, for popular support. That argument was false because Mr. Gorbachev as head of the committee, would have become a new focus for popular backing. But the idea of a new power center was intolerable to those who would lose their jobs, and with the probable help of the army and K.G.B., they persuaded Mr. Gorbachev to entrust the old guard with execution of the plan.

This means the centerpiece of the plan, the inter-regional committee, will not be implemented, because the republics will not delegate the necessary powers to the old discredited hands. The rift between the center and republics will continue and the measures introduced by the Government will lack public support The nation wants to move toward a market economy and may yet be given a chance after the Gorbachev plan fizzles. Only after the market option has been fully played out and has failed will public opinion swing in the opposite direction. At that point the fed-up nation people may be ready for a hardline dictatorship.

The West is obliged to give Mr. Gorbachev emergency aid but must recognize that his economic compromise won’t work. It can only wait for the political situation to evolve. In the meantime, it ought to provide all possible technical assistance and training to prepare for the day when a new version of the Shatalin plan may yet be implemented.