Soviet Union's Economic Legacy: Stark Differences in Fiscal Retention and Trade Balances
The economic landscape of the former Soviet Union reveals stark differences in fiscal retention and trade balances among its republics. A recent analysis shows that while the Russian Federation retained only about 40% of the turnover tax collected on its territory, the Baltic Republics retained 45-50%, and Central Asian republics almost 100%.
Historically, Central Asian republics were subsidized regions within the USSR due to significant trade deficits. In 1989, these deficits were substantial: Kyrgyzstan at 810 million rubles, Tajikistan at 1.07 billion rubles, Turkmenistan at 320 million rubles, and Uzbekistan at 3.51 billion rubles.
However, the concept of 'subsidies' in the Western sense did not apply. Instead of monetary payments, products and resources were exchanged based on central planning and regional specialization. The Russian Soviet Federative Socialist Republic, as the economic center, provided industrial goods and machinery, while Central Asian republics mainly supplied raw materials like cotton, uranium, oil, and agricultural products. This complex division of labor was the foundation of the Soviet economic system.
Capital investment in the economies of Union republics was notably higher, ranging from 2 to 4 times that of Russia. Moscow also compensated for the negative trade balances in Central Asian republics.
The economic dynamics of the Soviet Union were characterized by varied fiscal retention rates and trade balances among its republics. While Central Asian republics retained nearly all turnover tax, they also faced significant trade deficits, which were offset by Moscow's compensation and a complex system of resource exchange.
