The Misadventure of Speeding Up: The USSR's Ambitious Leap Forward
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Mikhail Gorbachev, the General Secretary of the Communist Party of the Soviet Union (CPSU), envisioned a bold leap forward for the Soviet economy in 1985. He aimed to supercharge progress and innovate, pinning his hopes on accelerating economic growth, technological advancement, and a slew of policy reforms. Yet, history has shown that this ambitious leap was more of a misstep, eventually leading to the dissolution of the USSR.
Gorbachev's agenda for economic rejuvenation promised to transform production and achieve top-notch labor productivity. The plan was to bring 85% of civilian machine-building to global standards by the end of the XII five-year plan (1986-1990), forking over an investment of 200 billion rubles, a significant sum for the time. Moreover, investments pumped into the modernization of various industries, including oil and gas, agriculture, metallurgy, and biotechnology, were expected to yield substantial returns.
However, Gorbachev's vision didn't quite come to fruition. Investments in sectors like machinery, agriculture, and others didn't deliver the anticipated results. Historians and economists attributed this to systemic flaws in strategy, investment discrepancies in priority selection, and contradictory means to achieve profitable outcomes. Additionally, inefficient implementation at the local level played a significant role in the overall failure of the program.
The state budget also bore the brunt of the mismanagement, as for the first time since the war, it finished with a deficit in 1985, tripling in 1986. The anti-alcohol campaign launched in May 1985 contributed to the budget deficit and, consequently, weakened the financial standing of the country. Furthermore, the crash in world oil prices in the spring of 1986 caught the Soviet leadership off guard, and the Chernobyl nuclear disaster in April 1986 required substantial resources to address, furtehr straining the already overburdened state budget.
As a result, the "acceleration" policy was scrapped in 1986, and Gorbachev's new slogan, "perestroika," was introduced. but the damage was already done. The ineffective reforms led to numerous undesirable consequences, including budget overstrain and an increase in the number of enterprises failing to meet state plans. Production efficiency also saw a significant dip, with over 30% of enterprises becoming loss-making by the end of 1986. Rising hidden inflation, food crises, and goods crises further added to the social tension, deteriorating the quality of life for the citizens, and likely hastening the collapse of the USSR.
Misguided Triumph and Unheeded Lessons
Some argue that the Soviet economy was vulnerable and on its last legs in 1985, living standards were grim, and everybody lusted for jeans and chewing gum. Yet, sterner living standards were only understood after the USSR's collapse. Proponents of the "acceleration" policy claim that had the Soviet Union not rushed to modernize its economy, it would have continued its slow, painful decay.
However, pairing economic acceleration with political restructuring was a fatal miscalculation. As the program director of the Valdai Club points out, trying to speed up and restructure simultaneously is like thrusting an impossibly controlled bomb, with the inevitable fallout being the dissolution of the USSR.
Economic crises, particularly budgetary issues, weakened central power, which couldn't halt the process of state disintegration. Today's Russian economic authorities have taken lessons from the 1980s and 1990s, implementing measures such as the Stabilization Fund, low public and external debt, and frequent budget surpluses.
Yet, the private sector remains underdeveloped, and the state should work on reducing excessive government influence on business. As it comes down to fostering private sector growth, a shift in generational mindset is required, making the process a gradual one.
Several factors led to the Soviet economy's downfall. One crucial factor was inadequate focus on sustaining and maximizing the efficiency of existing capacities. Efficiency in a market economy is primarily driven by market rules, while in a planned economy, the process is far more challenging.
Essentially, significant resources in the USSR were utilized incredibly inefficiently. The problem was exacerbated following Stalin's death when market elements in the economy were abolished due to reforms.
The main mistake of the Soviet leadership in the second half of the 1980s was implementing political liberalization before economic reforms, as observed when contrasting the Soviet Union's experience with that of China under Deng Xiaoping, who focused on active economic modernization while strictly controlling political forces.
In retrospect, the economic crisis by 1985 was unavoidable. If economic reforms were launched in the 1960s or 1970s under Brezhnev, the USSR might have avoided its eventual collapse. But, unfortunately, the country's leadership realized that a crisis was afoot by the early 1980s.
Today, a crisis comparable to the perestroika era is unlikely, at least in part because today's Russian managers are much stronger than their Soviet counterparts. Still, continuous learning, adaptation, and the careful navigation of economic and political landscapes remain essential to sustainable growth and stability.
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#Perestroika#Mikhail Gorbachev#USSR#History#Economic Development#Analysis
- Gorbachev's ambitious economic rejuvenation plan, rooted in Perestroika, aimed to bring 85% of civilian machine-building to global standards by the end of the XII five-year plan, investing a significant sum of 200 billion rubles.
- The economic crises, particularly the budgetary issues, which weakened central power during Gorbachev's tenure, were a significant contributor to the eventual state disintegration, as lessons from the 1980s and 1990s show.
- The private sector in today's Russia remains underdeveloped, despite economic authorities implementing measures such as the Stabilization Fund, low public and external debt, and frequent budget surpluses.
- One crucial factor leading to the Soviet economy's downfall was the inadequate focus on sustaining and maximizing the efficiency of existing capacities, a problem that was exacerbated following Stalin's death when market elements in the economy were abolished due to reforms.
