Javier Herrera Martín

Was the Economic collapse of the USSR inevitable?

The USSR was officially established in 1922 as a consequence of the Bolshevik Revolution
in October of 1917 lead by Vladimir Lenin , it was the starting point of a communist state
that will grow very fast and will fight against the USA for the world’s leadership .This
greatest economic growth era for the Soviet Union will reach the top between the 1950-
1973 when the rest of the world was also growing ,in a period known as the golden age,
but the Soviet Union was even growing faster than the rest. On this essay I will analyze
what carried the USSR from its highest level of growth to its final decline and if it was
inevitable, for explaining it firstly I have analyze why the Soviet Union has grown so much
an so fast , what were the sources of this growing( the Soviet Union grow essentially by
extensive growth ) ,secondly I have made a review of the most important causes of its
collapse that are the following: no incentives for the workers, the limited reforms that can
be done because of the communist ideology, the Afghanistan war and the trade imbalance
caused in a great part by the oil crisis. Then I have written about how these problems could
be solved before the decline was very big to try to stop it and therefore if the
implementation of that reforms would be possible under the Soviet Union regime. I think
that something could have been done to solve the crisis and to save the USSR from its
collapse but doing it in the atmosphere of the Soviet Union in the seventies with the Cold
War and the defense of communist idea versus the USA´s capitalist idea was too difficult
and maybe impossible.

The Soviet Union growth from its establishment to the early seventies is awesome but it
was mainly achieved by extensive growth that it isn’t sustainable in the long run because it
is based in accumulation in labor and capital that it is not infinity ; so the URSS grow by
huge accumulation of labor and capital in a very intensive way under the Stalin’s five plan
system which worked for reach the goals defined by them and did it , although the Stalin
administration caused a lot of pain in Russian the society due to a strict way of interpreting
the communism . This kind of growth finished when the halt of it was reached, mainly all
the labor force was working and all the capital possible was been using to develop the
economy, moreover one of the main problem of the soviet economy was the decrease in
productivity and the reason why it happens was the small investment in TFP like a source
of growth.

The huge and probably the biggest problem in the USSR was the decline in productivity
and it was linked directly with the moral law of communism ideology that didn’t give
incentives to the workers for improving in their works or to the scientists for spending
efforts in research or to the engineers for trying to innovate, because their life quality
wouldn’t change in case of they tried to do that kind of things. This fact is summarize in a
popular sentence of the workers in that time ``they pretend to pay us, we pretend to work´´.
Therefore the lack of competition in the country didn’t give incentives for innovation and
the production system only focus its efforts in achieve the quantities given by the five years
plan of Stalin and not in producing better good for the consumers . Also it has to be
emphasize that the huge growth in the soviet economy wasn’t reflected in the individuals
life in terms of more and better goods to choose (in terms of sanity and education the
quality in the soviet union before the crisis was good) so the incentives to consume didn’t
rose . The main reason behind this situation was that all the economy growth was based in
the development of the heavy industry, war machinery, guns, tanks…..
The Russian agricultural sector is a clear example of this problem that is the lack of
incentives, before the WW1 Russian Empire was one of the greatest exporter in the world
of agricultural products and after decades of collective farming in Stalin’s era, the workers
with no ambition have developed poor works habits and adding up this decline in the
productivity per worker with the existence of a big distribution and transportation problem
because of the collectivization of the land , it result in a kind of paradox because the
country which was a great exporter of agricultural products ,years later didn’t produce
enough to feed its own population.
This decline in the agricultural sector plus the oil crisis caused a decline in the sales abroad
and the imports rose because of the need for purchasing food from the abroad due to the
inefficient agricultural soviet economy’s sector , the situation created a big trade imbalance
where the USSR where importing more than exporting producing a big inflation in the
soviet economy .The financial problem caused by this imbalance trade was aggravated by
the Afghanistan war financing and also because of the bad investments made in looking for
oil and trying to produce it in the Soviet Union that resulted in a larger cost of production
than a benefit for the sales.
At this point of the crisis with all the problems mentioned before in their highest peak,
Mikhail Gorbachev tried to solve those introducing liberal reforms: the perestroika that
liberalize in some aspects the economy and the glasnost that gives freedom of speech to the
population. The last one develop another problem for the Soviet Union ,the claim for
independence of a lot of countries that conform the union giving rise to national movements
along all the USSR that will disintegrate it afterward. The perestroika propose good ideas to
restructure the soviet economy like open up prices , giving incentives to the consumers by
the production being the answer of the demand not like before with the planned production
system or letting enterprises to planning their own production and paying the workers
depending of the gains. However the perestroika originated an unequal distribution of
incomes, making a breach between the GDP per capita of the richest and poorest and a lack
of competency that rose in monopoly and oligopolies. So these reforms were a failure that
aggravate the crisis which finished in the end of the USSR officially on 25 December of
1991.
In my opinion the economic collapse of the USSR would have been evitable if after Stalin’s
death, when the crisis began, the Communist Party had done some liberal reforms instead
of not doing something what carried the country to the stagnation and productivity decrease
,therefore ending in a fragmented country that Gorbachev tried to rescue when it was too
late. Moreover I think if the reforms would have been applied when the crisis started, today
the USSR would be like China which is a communist country and also an economic
superpower in the modern world with an economy that mixes the communism and the
capitalism. The reason why the USSR isn’t like China today is the lack of a leader at the
time with the power and the desire to make liberal reforms in the economy like those ones
did it by Deng Xiaoping in China after Mao Zedong death. Those reforms in China were
called The Four Modernizations because their actions have impact in the agriculture, some
of the reforms allowing to expand the private areas and introducing a system of family
responsibility where the family work in public lands but when they overcome a fix quantity
they could sale the rest of the quantity produced in the free market ,the industry , some
examples in the area is the open up to foreign investment and the more attention in
producing consumer goods , the national defense , in this area the reforms were essentially
focus in the modernization of the army like in the last are that was science and technology
which its goals was breaking the breach between china and the occident.
In conclusion if USSR would have applied similar reforms at that one’s applied in China at
the convenient time, the Soviet Union hadn’t collapse. But if we take into account the clime
of the Cold War and the situation of the moment of the crisis, it would be too difficult to
apply that liberal reforms without a leader like Deng Xiaoping in China, even though the
Soviet Union have once a liberal leader with enough power to make reforms, Lenin who
make the NEP, still we can’t know if it was going to continue it like in China because he
died.
So finally at that particular time in the history, the economic collapse in the USSR‘s was
inevitable.

Bibliography
Allen, Robert C. (2003). Farm to Factory: A Reinterpretation of the Soviet Industrial
Revolution, Princeton, Princeton University Press
William E. Watson, The Collapse of Communism in the Soviet Union, Greenwood Press,
1998
Governing China: From revolution through reform
K Lieberthal, - 1995 - WW Norton New York

Ann White, Democratization in Russia under Gorbachev, 1985-91