Theme 5 - Fall of the USSR

Long term economic weaknesses

Evidence of declining growth rates?

Average growth rate dropped from 5% under Khrushchev to 0.6% by 1980 under Brezhnev

• 1958-63 (KHRUSHCHEV) Soviet economy grew at ~5% annually

• 1970s - annual growth rate averaged 2%

• 1980 - annul growth rate dropped to 0.6%

Long term economic weaknesses

Evidence of waste?

By 1980s GOSPLAN demanded 400,000 tractors every year.

At least 20 wasted due to shortage of tractor drivers.

Long term economic weaknesses

Evidence of lack of modernisation?

1960s 25% of Soviet workers employed on farms vs 4.5% in USA

Long term economic weaknesses

Evidence of military strain on economy?

1965-85 (Brezhnev, Andropov and Chernenko) proportion of Soviet GDP spending on defence increased 12% to 17%.

US defence spending averaged 6% of GDP

Long term economic weaknesses

Evidence that centralisation was a problem?

Economy controlled by gov administration.

• Farmers could not use expertise to adjust to local conditions

• Delivery of fertiliser arrived at wrong times or were wrong type

Long term economic weaknesses

Evidence of smaller wealth gap?

1970:

Richest 10% of Americans 7x wealthier than poorest 10%.

Richest 10% of Russians 3x wealthier than poorest 10%

Stage One (1985-86): Rationalisation

Evidence of addressing alcoholism?

Continued Andropovs anti-Alcohol campaign

May 1985 reduced alcohol production at state-run factories by 50%

55,000 party members assigned to new task force preventing illegal production of alcohol

Stage One (1985-86): Rationalisation

Evidence of alcohol policies failing?

Alcohol consumption doubled 1960-87

Soviet citizens consumed 15-16 litres alcohol every year

4.5m registered alcoholics

Illegal production reduced sales of gov of vodka - worsened economic issues

Stage one (1985-86): Rationalisation

Evidence of acceleration campaign failing?

Acceleration campaign increased investment to modernise Soviet economy.

Oil price fell by ~70% (1981-85) → Oil revenues dropped by 2/3rds

Financed from Western countries → gov debt increased by 50% (1981-1988)

Stage two (1987-90): Reform

Evidence of successful partial market reform?

• Law on individual economic activity (1986) - legal for families and individuals to profit from small scale work

• Law on cooperatives (1988) - legal to set up large scale private companies

1990 ~200,000 cooperatives set up

Cooperatives turn over in first year 3m to 1bn roubles

Stage two (1987-90): Reform

Evidence of failed partial market reform?

• Law on state enterprise (1987) - intended to devolved power from central gov to factory management

- Very little power devolved from GOSPLAN

- Factory ability to charge higher prices increased gov debt

Stage two (1987-90): Reform

Evidence of economic problems with reform?

• Free market prices higher than subsidised state prices = free market goods unpopular

• Gov imposed low prices on cooperatives = production uneconomic

Stage two (1987-90): Reform

Evidence of political problems with reform?

• Undermined central planning system

• 1990 severe food shortages - Soviet farms produced ~220m tons of grain BUT no effective distribution system = resentment at failing state systems

• 1986-90 GDP decreased by 4% - had to cut state subsidies = decline in living standards & reduced Gorbachev’s approval ratings

Stage three (1990-91): Transformation

Evidence of move to full market economy?

500 Day Program = widespread privatisation & complete marketisation in 2 years

• Gorbachev supported program initially

• Withdraw support due to senior hard-line communist pressure → wanted slower pace of reform

Reform & collapse (1991)

Evidence of later attempts at reform?

• Jan 1991 introduced private property

• April 1991 allowed citizens to trade stocks & shares

Reform & collapse (1991)

Evidence later reforms were too little too late?

• Economy continued to decline → beyond crisis to catastrophe

• Summer 1991 Soviet gov and republican gov effectively bankrupt

• Yeltsin’s programme of full marketisation October 1991 hard to implement

Limitations of economic argument

Western interpretation:

• Liberal free market economics best

• Assume state planning inherently weak - Marxist historians view as more solvable

Historical exemptions:

• USA recovered from Great Depression 1930s

• China and Vietnam still communist- moved from command to free market economies successfully