The economy under Gorbachev 1985-91

A mind map of the Soviet economy under Gorbachev between 1985 and 1991.

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  • The economy under Gorbachev 1985-91
    • Gorbachev
      • Became General Secretary after only 5 years in the Politburo in 1985
      • Interpretations of his handling of the economy
        • Economy already in decline when Gorbachev came into office
        • Gorbachev caused the irreversible decline of the Soviet economy
    • Soviet economy in 1985
      • Command economy
        • Economy controlled centrally by government, prioritising industrial output
        • Generally lacked acceptance of new ideas
        • Consumer goods were marginalised
      • GNP had fallen by almost a half since the late 60's
    • The Law on Joint Ventures
      • January 1987
      • Initially allowed Soviet businesses to be 49% owned by foreign investors
        • Expanded to 100% by 1990
      • Ended the monopoly of state run business
      • Soviet businesses were able to compete with Western business
      • Undermined by state
        • Businesses in profit were heavily taxed
          • No incentive to push for growth
    • The Enterprise Law
      • Aimed to allow business to make decisions themselves
      • Subsidies for businesses that took this option
      • Would still remain state controlled
      • Good example of 'perestroika' or restructuring
      • First time competition had really been allowed or encouraged in the USSR
      • January 1988
    • Economic reforms 1990
      • Designed to increase the rate of growth
      • Rushed and hurriedly agreed by Gorbachev
      • Reduced state subsidies
        • Move towards a market economy controlled y supply and demand
      • Fears surrounding inflation and unemployment rises meant a reduction of the plans
    • The collapse of Comecon
      • 1984 saw cheap exports of fuel/raw materials to the Eastern bloc reduced as the Soviet economy struggled
        • Forced these countries into closer links with the West
      • System of isolated states prevented progress
      • Partnership between Comecon and EC finalised in June 1988
      • January 1991 saw the beginning of a market economy across Eastern Europe
      • Final collapse on 28 September 1991


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