.png)
Soviet Economic history dealt with multiple complexities due to its centralized structure and exists as a classic textbook case with events of how centrally planned economies falter when every stage of economic activity becomes highly concentrated. The economic evolution of the Soviet economy is said to be classified under 3 epochs:
(a) Khrushchev Thaw (de-Stalinization, 1953-1964);
(b) Era of Stagnation (1964-1984);
(c) Perestroika (1985-1991).
The Khrushchev period saw political prisoners freed, censorship on the press lifted, and forced labor programs closed. However, this period could not flourish after the removal of Khrushchev.
The later period was defined as the 'Era of Stagnation', destabilized the Soviet economy and saw a rise in corruption in the higher echelons of the bureaucracy. Three presidents pushed forward with heavily centralized policies, and extensive censorship of the press under the influence of select oligarchs called the “Troika”. This period was widely reputed for the pilferage of the Soviet economy, where trade licenses were given to mafias in return for heavy bribes, and the prevalence of famines with increased consumption of vodkas with youths falling prone to alcoholism.
Introduction of New economic policies
In its most punctured state, Soviet Russia gets a not-so-known leader through Mikhail Gorbachev whose influence on the future of the Soviet Union’s timeline shall change forever. Gorbachev was an admirer of the progression achieved by Western economies and wanted to implement it, even here too. Being less communist and more open to a capitalist view, in 1985, he introduced “Glasnost” (openness & transparency) as a policy of maximum transparency in the functioning of governmental institutions and freedom of information, as well as the inadmissibility of burying problems. The fundamental objective of this program was to increase management transparency and avoid the Union's economy and bureaucracy being held in almost total control by a small group of officials and bureaucrats.
Re-examination of Soviet history under Stalin, increased accessibility of censored literature in libraries, improved media transparency, and increased public freedom of speech all occurred during this time. Most Soviet Union citizens first learned about Stalin's atrocities and previously hidden events in the late 1980s. Along with western popular culture, information about the purportedly superior standard of living and consumer goods in the United States and Western Europe started to reach the Soviet populace.
To further strengthen his reforms, “Perestroika” (restructuring) also becomes the economic face of his plans. It developed extensive market-like reforms and gave various ministries more liberty to act autonomously. The purported objective, however, never aimed at abolishing the command economy but improving the efficiency of socialism to better serve the needs of Soviet citizens. Perestroika's implementation increased already acute shortages and exacerbated social, political, and economic unrest within the Soviet Union. The rise of nationalism and nationalist political parties in the component republics is also frequently attributed to it.
What did the reforms say?
To boost individual productivity, by keeping consumer demand, inflation, and worker discontent in line. Gorbachev first targeted alcoholism by increasing vodka prices, then followed by restricting of public sale of alcohol and punishments to be served if found in an intoxicated state either in public or at work. Shortly after, the drinking age limit increased from 18 to 21. The Western nations termed it the aim for ‘Perestroika' of the personality.
The state-owned firms were free to set production levels based on consumer and other enterprise demands. Businesses were required to execute governmental demands but were free to dispose of any excess output as they deemed fit. These business houses were nevertheless unable to implement full-cost accountability since the state continued to control their means of production. Suppliers provided input to businesses at agreed-upon prices.
Therefore, businesses had to generate revenues to pay costs (such as salaries, tariffs, supplies, and debt servicing) by self-financing. The government was no longer responsible for saving unprofitable businesses from bankruptcy. It now granted elected workers' collectives power over enterprise operations instead of ministries. The proposals of the State Planning Committee (Gosplan) were to provide broad principles and national investment goals rather than to develop specific production plans.
Collective ownership of firms in the service, industrial, and foreign-trade sectors was permitted. To prevent any discouragement from private-sector development, a reduction in initial high taxes and employment limits were enforced. Cooperative restaurants, shops, and factories entered the Soviet landscape.
Foreign economic sector policies of the Soviet Union were amended. It was essential to end the Ministry of Foreign Trade's former monopoly on most trade operations. Instead of working indirectly through the bureaucracy of trade ministry organizations, it allowed the ministries of the various industrial and agricultural branches to undertake foreign commerce in fields within their jurisdiction. Additionally, regional, municipal, and state firms were allowed to engage in international trade.
Foreign investors can now create joint ventures with Soviet ministries, state businesses, and cooperatives in the Soviet Union. Before, only 49 percent of Soviet ventures could be owned by foreign investors, and the chairman and general manager had to be Soviet citizens. After hearing feedback from prospective Western partners, the government changed the rules to permit majority foreign ownership and control. The Soviet partner provided the manpower, a well-developed infrastructure, and a sizable domestic market. The foreign partner contributed money, technology, entrepreneurial know-how, and in many cases, high-quality goods and services that could compete globally.
Gorbachev's economic reforms did little to revitalize the country's stagnant economy in the late 1980s. The command economy's macroeconomic features, such as price restrictions, the rouble's inconvertibility, the exclusion of private property ownership, and the government's monopoly over the majority of means of production, were preserved under Gorbachev's gradualist reforms.
How did the West see Gorbachev’s Reforms?
The West always remained a spectator during these and watched these reforms under close apprehension. They had predicted that this would result in the collapse of the Soviet Union but they failed to capitalize on it. When foreign investments were invited, the U.S restricted the flow of investments in Soviet ventures. When the Rouble crashed, they refrained from providing monetary support to the Soviets. Though various leaders from the West, hailed Gorbachev as a man ahead of his time, they failed to support him in a time of crisis. Had the West stepped up in resolving important crises within the Soviets, their influence on Soviet Russia would have gone manifold and opportunities for greater economic prospects for both groups could have been achieved.
Gorbachev remained a core Socialist but also recognized the values of being honest and legitimate to the people of his nation. All of the mentioned aspects justify his action in declaring the Chornobyl nuclear disaster, withdrawal of forces from Afghanistan, etc. His policies were short-lived due to the inherent bottlenecks present in the administrative system. It granted immense freedom to the public, who now wanted more facilities like their Western counterparts with which the Soviet economic system was able to cope. Unlike the other nations, the rapid discontentment in various smaller republics based on nationalism and independence from the Soviet regime also multiplied, accelerating the downfall of his rule.
However, Gorbachev is also credited internationally for ending the Cold War and won the Nobel Peace Prize in 1990 for these efforts.
Comments