The Three Deaths of the Soviet Union Part 1: Economic


September 4th, 2015 – 

By: Sergei Poletaev for PolitRussia – 

translated for Fort Russ by J. Arnoldski 

Twenty-four years ago, our homeland awakened to the sounds of
Swan lake. On August 19, 1991, Central Television announced that President
Gorbachev, for health reasons, was unable to perform his duties, and power was
now in the hands of the State Committee on the State of Emergency. A three-day
coup attempt began, followed by a brief agony for a great empire. And in
December of the same year, the Soviet Union hopelessly and uneventfully ceased
to exist.

How did it come to be, that one of the two world superpowers,
the country with the strongest army, a first-class education system, and a
strong industry suddenly crumbled, leaving behind war-torn, puny shard
republics. Who was to blame: Gorbachev and Yeltsin, the CIA, or the Voice of
America? Why did the Soviet Union collapse?

The answer is simple and complicated at the same time: the USSR
collapsed due to the fact that it lost the cold war, which was not only a
global power struggle, but also a struggle between two social-economic systems.
The Soviet system couldn’t withstand the competition with the West, and proved
to be incapable of reforming itself internally. Eventually, it just collapsed,
along with the country.

The classic teach us that the economy is the base that defines
and the essence and image of the state. The successes and failures of a country
depend on the state and level of development of the economy. A seemingly mighty
power with a flawed economic model is a colossus with a feet of clay, so only a
small push and it collapses under its own weight. This is what happened with
the Soviet Union.

At the dawn of the Stalin era, capitalism was enduring hard
times. Unrestrained financial oligarchy, total corruption, speculation and the
boundless exploitation of workers led to the Great Depression and the near
complete collapse of government management in Western countries.

At the same time, the USSR under Stalin actually became a
corporate state in which central planning almost entirely replaced the free

In the ’30’s, this presented immediate advantages: an enormous
breakthrough in modernization, and the construction of hundreds and thousands
of new factories, roads, and cities. Rigid vertical integration helped us
defeat the strongest army in history, and after the war to rebuild the country
and implement new large projects: nuclear programs, aerospace, radar, jet
aircraft, computers, and son. Quite right is the claim that Stalin took a
country with plows and left it with a nuclear bomb. In the late ’50’s, the USSR
was the best power in all that concerns science and technology. In a quarter
century, the standard of living had greatly increased.

Then, at the end of the ’50’s, the rigid command system began to
falter. For various reasons, the directives of the State Planning Commission
were not fulfilled, and those responsible (managers and directors at the local
level) triumphed with false statements, fraud, and voluntarism. Theft and
corruption began to flourish again. Stalin’s system of state-building proved to
be brilliantly effective in the conditions of crisis and mobilization, but
weren’t suitable for a peaceful life.

The response to this was a new economic policy in the mid ’60’s
– the so-called Kosygin reforms – which enhanced the financial autonomy of
enterprises. This was a significant departure from Stalinist centralization.
Enterprise managers (the “Red Directors”) became in fact quasi-capitalists.
They had at their disposal real financial funds that could be spent on premiums
for workers, on the construction of corporate housing, in the social sphere
(boarding, summer camps, holidays, etc.), and, to a limited extent, on the
development of production.

The Kosygin reform is considered to have failed. But this is not
so: technical assignments and plan projects indicate that the reform was even
exceeded. The cause of the collapse of the Kosygin reforms was that too rapid a
rate of success threatened the stability of the socio-political system.

Anyway, the logical continuation of the reforms – the transition
to market independence – didn’t take place. The country entered the era of
stagnation with a strange, dualistic economic structure: an enterprise had
money available, but it wasn’t allowed to spend money at its own discretion. An
enterprise possessed the means of production, but couldn’t decide what to

The West did not lose in vain. Taking advantage of the best
socialist practices even before the war, the capitalist countries moved towards
state regulation of the economy, to strategic planning and well-developed
social protection. Combined with the free market and increased productivity,
these measures provided a dramatic increase in standards of living.

In the ’60’s, a broad middle class appeared in the West, and the
basis for economic growth became mass private consumption, complicating
economic structures and again increasing standards o living.

Meanwhile, we had a huge reservoir of an economy. The production
of consumer goods deteriorated from year to year. On the one hand, an
enterprise couldn’t invest in products for which there was a demand (and
profiting from this).

On the other hand, for a number of reason, state investments all
went into heavy industry and the military industrial complex. Yes, every
defense enterprise was required to produce civilian goods, but the list and
prices were set from above, and funds allocated to production were a last

The market remained extremely undeveloped compared to Western
countries. There isn’t much to tell. It’s enough to remember Soviet shops,
cafes, cinemas, taxis, or hairdressers. There was not enough, and it was
disgustingly bad. And after all, services are the largest, most powerful, and
most flexible share of a modern economy.

The Yom Kippur War and the subsequent oil crisis of 1973
dramatically increased the demand for Soviet energy resources, and it became
possible to oil the problems of the Soviet economy with money received for the
sale of oil and gas to the West. Still more advanced and diversified than in
the 1950’s, the Soviet economy, in the years of stagnation, continued to lag
further behind the West. More goods were bought in the West, ranging from
fabric and boots up to complex production lines. 

Although powerful at first
glance, our industry produced surprisingly few world class products – guns,
missiles, some heavy machinery (turbines), and various metals – and that’s
perhaps all. Soviet TV’s and coffee grinders were only bought because there
weren’t others, and they became the butts of jokes in those days. Contemporary
Russian industry is in fact much closer to the world level than the stagnant
Soviet one.

Another scourge of the Soviet economy was its terrible
inefficiency. Firstly, the principle of 
universal employment guaranteed by a social state, meant that negligent
employees couldn’t be fired, and companies had no incentives to improve
technology and increase productivity.

Many Soviet enterprises, especially in the civilian sector, used
pre-war machinery on a mass-scale, and directives from the State Planning
Commission were inconsistently fulfilled. By the end of the ’80’s, industrial
performance still lagged behind the advanced countries by two times (and this
despite the construction of extremely efficient giant mills), and agriculture
lagged behind by 4-5 times.

But productivity isn’t everything. Despite centralization,
investments and the expenditure of resources was insufficient. For example, a
village was supplied with expensive and ill-attended harvesters which quickly
broke down on rotted on the sidelines. In civil aviation, aircraft from the
’60’s were still flown, which, while excellent in their time, had already long
become obsolete.

No one was involved in energy conservation. Thermoelectric
plants, while efficient in theory, supplied homes and streets through poorly
insulated pipes. Gathered in fields, grain was often contaminated due to poor
storage conditions. There are hundreds and thousands of such examples: the late
Soviet economy resembled a leaky boat, which kept afloat only so long as it
paled out water.

In the mid ’80’s, oil prices plummeted. Legend has it that it
was a special CIA operation aimed at toppling the Soviet Union, and if it was,
then it certainly succeeded. Actually, of course, there was no such conspiracy:
it was a simple of over production. After a sharp jump in prices, everyone
rushed to invest in oil production in the 1970’s. On the other and, the high
prices of fuel forced savings. Compact cars, fuel-efficient aircraft, and the
transition from oil power to gas and coal became popular.

And so, in 1981, the oil bubble naturally burst, and in a few
years prices dropped three times [this much is not necessarily true – as today US price collusion with OPEC to sabotage the Soviet economy was a mechanism – .ed]. If the Soviet economy had been balanced, and
if the ’70’s we hadn’t become a raw materials appendage of the West, if we
hadn’t been vitally  dependent on grain
and goods which were brought in from the West for petrodollars, if enterprises
were able to work amidst crisis, and if the elite had come to their senses in
time, then the hard times could have been overcome.

However, something else happened. The post-war era had been
marked by the global military rival of two superpowers. The Soviet Union was
forced to spend precious resources on defending its sphere of influence.
Because of this, the Soviet leadership was unable to decide on fundamental

In the 1960’s, we had a real chance to go the Chinese way (or
rather, vice versa: Deng Xiaoping largely replied on the experience of the
Kosygin reforms for his own) and to build a strong and sustainable economy and
a secure, strong, and sustainable state. The belated and clumsy attempts of
Gorbachev’s reforms couldn’t help and the empire was hopelessly sick. History
decreed otherwise, and the reasons for this lie in the events that occurred
after the Second World War.

It is this – the military confrontation with the West and its
role in the demise of the USSR – that we will explore in the next part. 


See the RT documentary, ‘Blood on the Streets

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