Economic reforms ending the USSR

Reform

• May 1985 - reduced alcohol production of state - run factories by 50%
• 55,000 party members to new task force to stop illegal production of alcohol

Problems

• Alcohol consumption in 1987 double than 1960
• 1987 - citizens over 15 consuming 15-16 litres of alcohol every year. 4.5m registered alcoholics
• Citizens now drinking samogon, illegally manufactured alcohol

Consequences

• Gov. make much less money out of vodka sales
• Gov. alcohol revenues dropped by 67m roubles (9% of GDP) - economic problems worse
• Failed to eradicate alcohol problem
• Campaign abandoned in 1988

Reform

• Designed to end stagnation
• Increase in investment, designed to modernise Soviet economy, make more efficient

Problems

• Decline due to global price of oil - fall from $70 a barrel in 1981 to $20 in 1985. Oil revenue down 2/3 and drop in alcohol = significantly less money from 1980s
• Borrowed money from Western countries - increase in debt from $18.1b in 1981 to $27.2b in 1988
• Gorbachev invested in energy production, ignoring advice from economic experts to invest in high-tech machines

Consequences

• Increase in debt - gov. spending more on interest payment
• Less money for further modernisation or to produce consumer goods - economic crisis