Interpretations

• Soviet economy


  • Flawed
  • Failed to create incentives for hard work or innovation
• From 1945-1980, the Soviet Union had an egalitarian state where the difference between rich and poor was much smaller than in the West
• Therefore, there was less incentive to improve in the Soviet Union compared to the West
• Labour productivity was much lower in the Soviet Union compared to the West
• Gosplan state planning committee

  • Measured and rewarded production
  • Quality of production was irrelevant
  • Proportion of goods being used or whether they were even being used was irrelevant
• Although a large amount of goods were produced in the Soviet Union, they were often wasted
• Waste in the Soviet economy

  • At least 20% of 400,000 tractors demanded by Gosplan went unused due to shortages of tractor drivers
  • Estimated 12% of machinery went unused
• Soviet agriculture


  • Lacked sophisticated machinery
  • Required a lot more labour than the West
• In 1960's, 25.4% of Soviet workers were in farms, compared to just 4.6% in the West
• Despite having a greater percentage of workers in farms, the Soviet Union still managed six times less production than America
• Soviet transportation system


  • Never fully modernised
  • Transporting food was difficult
• Lack of modern storage system led to crops like grain rotting away due to inadequate storage facilities before it would be used
• Between 1965-1985, the proportion of Soviet GDP spent on defence went from 12% to 17%, compared to an average of 6% in America over this period
• Soviet defence spending starved other areas of the economy that actually needed it
• Soviet economy


  • Controlled by government administrators
  • In farming, the government set timetables for planning and harvesting without accounting for local initiatives
  • Central planners set schedules for delivery of fertilisers, often delivered late or the wrong kind
• Centralisation caused significant issues because it limited production
• Perestroika


  1. Rationalisation 1985-1986

  2. Reform 1987-1990

  3. Transformation 1990-1991
• Gorbachev's reforms consistently failed to increase economic growth, and the Soviet economy stopped growing
• By 1985, the Soviet economy was not just weaker than the West, but was even being overtaken by developing countries in Asia
• Gorbachev's anti-alcohol campaign


  1. Limiting alcohol production at state run factories by 50%

  2. Assigning 55,000 party members to a new task force to stop illegal production
• The anti-alcohol campaign generally failed, with consumption in 1987 still double that of 1960 and 4.5 million registered alcoholics
• The campaign meant the Soviet government made less revenue from vodka sales, with revenue falling by 67 billion Roubles
• The economic conditions grew even worse, leading to the campaign being abandoned by 1988
• Acceleration (Uskorenie)


  1. Huge increase in investment to modernise the Soviet economy and make it more efficient

  2. Gorbachev predicted a 20% increase in industrial production in the next fifteen years
• A major reason for the failure of Acceleration was the decline in global oil prices, with Soviet oil revenues falling by more than 40% from 1981-1985
• Gorbachev financed Acceleration through borrowing from Western countries, with government debt rising from $18.1 billion in 1981 to $27.2 billion in 1988
• Gorbachev invested in energy production, ignoring the advice of his economic experts, and this investment did not lead to greater growth
• The increased debt led to more government spending on interest payments, leaving less money to spend on further modernisation or to produce consumer goods
• Overall, Acceleration did not lead to economic growth, instead leading to economic crisis
• Partial market reform


  1. Law on Individual Economic Activity of November 1986

  2. 1987 Law on State Enterprise

  3. 1988 Law on Co-operatives
• The new market could not function properly due to issues such as government subsidies and price capping
• Partial market reform created economic chaos, with shortages of essential goods increasing
• Price rises led to dissatisfaction with the government, with Gorbachev's approval rating dropping from 52% in 1989 to 21% in 1990
• The number of strikes increased from 260 enterprises affected in 1990 to 1755 in 1991
• The economic chaos led to widespread support for nationalist movements demanding the disbanding of the USSR
• 500 Day Program


  1. Proposed widespread privatisation and marketisation in less than two years

  2. Gorbachev initially supported the proposals but then backed down, wanting a slower pace of reform
• By 1991, the Soviet government was bankrupt and neither the Soviets nor the Republican governments had the economic power to govern
• Consequently, Yeltsin announced a program of full marketisation in 1991
• Centralised party


  Control over the state across the whole of the Soviet Union
• Regional parties


  Obeyed the Communist Party of the Soviet Union