Economic Factors- end of the Cold War

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  • Economic factors
    • Stagnant Soviet Economy
      • command economy lacked flexibility
      • ineffective central planning methods
        • couldn't adapt to collapsing economy. Instead stuck to plan which was unsuccessful
          • unrealistic production targets of 5 yr plans
      • unrealistic production targets of 5 yr plans
      • growth of industry only 2% in 1980
        • fallen since 5%+ in 1967
    • USA Strengths
      • 50% larger economy
      • technologically more advanced and produced higher quality products
    • Arms Race
      • because USSR weaker economic position worsened
      • Mid 1980s military spending 40% state budget
      • 20% GDP far higher than USA 7% GDP
    • Technological backwardness
      • Trade embargo (ban) in 1970s
      • 1974 sale of PCs banned
      • only 50,000 PCs in USSR and 30M in USA (early 80s)
    • Energy and Oil
      • USSR reliant on export of oil and gas
        • hit by fall in prices- 1970 oil was 15.6% of soviet exports.
          • By 1984 this was 54% but oil value fell by 90%
        • Gas production 9.5M to 156M cubic meters but value fell 50% in 1980s
    • Impact
      • Eastern Europe
        • caused popular discontent- poor living standards, unemployment and high prices
        • argue it led to the fall of USSR due to the growing desire for capitalism
      • Prompted New thinking
        • needed urgent reform to raise living standards
        • wanted to reduce escalating cost of nuclear arms race
        • needed space and undivided attention to reform the centralised state economic planning


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