The USSR under pressure

  1. The condition of the Soviet economy
  2. The soviet economy and its impact on the Cold War
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  • Created by: Tom
  • Created on: 20-04-14 14:35

The condition of the Soviet economy

  • Brezhnev died 1982 - successor Yuri Andropov acknowledged that "there are many problems in our national economy that are overdue for solution. I do not have any receipts for their solution"
  • Soviet economy slowing down during the 1970's
  • GNP 5.2% 1960, 2.7% 1975-80
  • S.U produced 155 million tonnes coal 1977 - U.S 115 million - S.U still forced to import $2billion of steel, tin, steel pipes
  • S.U significantly behind Western states in terms of technology
  • S.U failed to integrate its technical advances from space and military research into the civilian economy
  • 1979-82 world economic recession - during this period, crucial soviet sectors such as oil, coal, iron, steel began to plateu in growth
  • led to industrial decline, had significant impact on economies of East bloc, and this led to weakening of communist control on Eastern bloc
  • for decades S.U had been supplier of cheap fuel for all of Eastern Europe
  • as growth declined, so did S.U capacity to recieve Eastern European manufactured goods
  • decline in flow of trade between S.U and eastern bloc undermined confidence in comm economic system
  • 1980's - growth in agriculture slowed significantly - result of continued droughts/poor harvest
  • 1975 - S.U entered 5-year agreement with U.S to buy 8m tonnes of grain annually
  • unreformed S.U system of collectivised agriculture increased production problems
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The condition of the Soviet economy

  • by 1981 detente had drawn to a close and U.S placed trade embargos on the S.U, particularly grain exports
  • end of detente triggered an escalation of nuclear arms race up to 1984
  • 1979 - S.U invaded Afghanistan - added to growing economic costs. Impacted on Soviet people's quality of life
  • 1981 - rate of growth in consumer goods in S.U = 0%
  • major decline in provision of health care and rise in levels of infant mortality
  • Richard Crockatt - " non one would dare claim in 1980 that Krushchev had claimed in 1960: that within a decade the Soviet Union would match and even overtake the United States"
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the economy under Gorbachev 1985-90

  • Gorbachev was the person responsible for the irreversible decline that the S.U had reached by the 1990's
  • he didn't plan the collapse, however.
  • Soviet economy = command economy = inflexible system of central planning which rejected innovation and new ideas to maximise productivity
  • Martin Goldman - "Soviet planners were simply unable to keep up with the speed with which one innovation superseded another"
  • central planning focused on large scale production of traditional goods(coal, steel etc) but didn't focus on consumer goods
  • economic crisis did not cause the collapse of Communism by itself
  • However, in conjunction with glasnost(openness) and perestroika(restructuring) it formed a pivotal role.
  • perestroika was the key to Gorbachev's economic reforms, which were designed to improve the performance of the Soviet economy - maximise the potential of the existing economic and production systems
  • the problem was that the existing system was not working and therefore any retantion of that failed system would not work either.
  • Gorbachev linked mediocre economic growth to political, ideological and foreign policy problems
  • If the economy could expand, then all problems would be reduced
  • therefore, if Gorbachev's aims did not work then foreign policy problems would deepen.
  • clear there was a direct link between the S.U's economic performance and S.P status
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Industrial efficiency, 1985-7

  • Gorbachev wanted to increase production targets in light industry, machine building, food, meat, dairy products
  • 1985-86 people involved in these areas made more responsible for their targets
  • any profits from over-production put back inj to factories
  • light industries allowed to respond to demands of market
  • May 1986 - quality control system introduced. The Grospriomka
  • widespread opposition and by May 1988 it was withdrawn
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Law on Joint Ventures, January 1987

  • allowed foreign ownership on no more than 49% of a business - control remained in hands of state who would have 51%+ share
  • extended to 100% by 1990 - clear example = 1st Mcdonald's in moscow, 1990
  • gradually ended state monopoly and allowed foreign investment
  • also allowed Soviet businesses to enter into competition with West
  • these policies would not be effective while a communist controlled central planning system remained in place as part of the command economy
  • Joint ventures scheme heavily undermined by state - once a business became profitable it was heavily taxed by state
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Enterprise Law, January 1988

  • focused on state controlled enterprise and businesses
  • aimed to decentralise authority and devolve decision making down to the business/enterprise themselves
  • significant cut in state subsidies - they were to become profit making organisations
  • degree of independence limited
  • state recieved 85% of production - 15% to anyone else
  • vague element of competition emerged
  • managers were given more control over wage levels - led to increased unemployment as workers laid off for cost efficiency
  • an attempt to operate a command system within a market economy
  • aim of increased independence was good, but method was bad and therefore doomed to failure.
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workers' discontent

  • inflation + rising prices made life hard for many
  • July 1989 - coal miners in Kuzbass minefield strike. Poor pay + working conditions. - Strikes spread to Donbas mines and into Pechora and Karaganda - 200k miners involved in industrial action
  • miners called for an end to Communist control over mines. Political control seen as barrier to ch\nge and improvement
  • miners even formed un-official trade union - something never seen ebfore in S.U
  • October 1989 - gov. accepted basic right of workers to strike - strikes remained illegal in key areas
  • Issue underpinning strikes was pay - although incomes were rising faster than olevels of productivity
  • 1990 - incomes rose by 15%, productivity rose by 0%
  • S.U economy in need of urgent reform
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economic reform plans, 1990

  • 1989 - economy in generally reasonable condition. Progress slow but present
  • clear there had been a fall in living standards
  • 1988 - Gorbachev acknowledged economy was changing too slowly
  • March 1990 Gorbachev headed Commision for developing a reform package
  • aimed to produce rapid programme of reforms to be in place within a month - underlined urgency of the problems
  • May 1990 - proposals presented to USSR Supreme Soviet
  • initial move was to reduce state subsidies. First step towards a gradual shift to a market economy driven by supply and demand
  • immediate cost of reducing subsidies was increase in price of consumer goods
  • price of bread expected to double
  • increase in non-consumer goods expected to be even higher
  • prospect of high inflation and rising unemployment force Supreme Soviet to call for more restrained plans
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the position by 1991

  • S.U economic position critical by 1991
  • GNP fallen by 8%, national income fallen by 10%
  • Industrial + Agricultural output fallen dramatically
  • exports fallen by 33% and 45% reduction in imports
  • S.U's trade with other countries in free fall
  • Crisis complicated by moves toward political decentralisation and rise of nationalism
  • number of republics within union were unwilling to cooperate with centrally planned change and began to withold revenue
  • contributed to significant shortfall in national budget
  • planned spending on military under threat
  • S.U on brink of breaking up and republics increasingly determined to not cooperate with centralising of the economy and centralised economic planning on national level
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the soviet economy and its impact on the cold war

  • communist bloc integral part of S.U's international power
  • economic problems within S.U undermined its ability in Cold War environment
  • internal problems also undermined the economic strength of eastern european states
  • organisation that held these diverse economies together was Comecon
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the collapse of Comecon

  • June 1984 - Comecon economic summit held in moscow
  • aimed to promote 'intensive growth' through tighter coordination of national economic plans
  • S.U said exports of fueld and raw materials to eastern Europe could not continue
  • forced eastern European states in to stronger economic links with West
  • December 1985 - Comecon called for increased scientific and technical cooperation among member states. Accelerate productivity through rapid advances in technology and innovation
  • plan failed as Communist system was based on centrally planned economic development within each state
  • system isolated states from one another so the idea of cooperation wouldn't work
  • Eastern European states reluctant to contribute to what they saw as schemes promoting Soviet economic interests
  • program only succeeed in weakening link between S.U and Comecon members
  • 1985 - secretary general of Comecon, Sychov, contacted president of European Commission - suggest mutual diplomatic recognition between them. Meant EC members able to set up trade+cooperation agreements with Comecon members. Started with Hungary, 1988.
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the collapse of Comecon

  • 1990-91 the final throes of Comecon's demise were enacted
    • December 1989 - S.U announces end of the supply of cheap fuel to Eastern European states
    • 1st january 1991 - all trade between Comecon members was to be driven by market prices rather than through subsidies
    • Comecon formally ended 28th September 1991
  • Comecon did little to create economic unity among eastern bloc. It was final chapter in collapse of Soviet power and influence in Eastern Europe.
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