The USSR Under Pressure - Problems
Condition of the Soviet Economy?
- Growth in GNP between 1975-1980 was 2.7%, as opposed to the 5.2% it had been in the 1960's
- USSR still had to import $2 billion worth of rolled steel despite production being 155 million tonnes
- Behind in terms of technology, failed to incoperate it'd advances from space and military into the civillian economy
- Decline in economy led to a decline in control over the Eastern Bloc
- As growth declined so did the USSR's capacity to receive Eastern European goods, this was detrimental to flow of trade and people lost confidence in communist economic system
- Made worse by the end of Detente by 1981 and the US embargos on exports to the USSR (in particular grain exports)
- Growth in consumer goods leveled at zero by 1981
- Decline in heath care and rise in infant mortality
The USSR Under Pressure - Policies
- Industrial Efficiency (1985-7): people involved in production made more responsible for their production targets. Any profits from over productions could be ploughed back into factories.
- The Law on Joint Ventures (Jan 1987): allowed foreign ownership on no more than 49% of the buisness orignally. Moscow's Mcdonalds was an example of this, however, the problem was that these buisnesses could never be fully effective or independant whilst a command economy was still in place. Once a venture entered profitability it was heavily taxed, draining profits and reducing any incentive to grow.
- The Enterprise Law (Jan 1988): gave more control to owners, however, state still demanded 85% of output whilst the other 15% could be sold to whoever they wished. This was an example of restructuring as opposed to dismantling.
- Workers' discontent: miners started to strike (first in Kuzbass). An issue underpining the strikes had been low pay, however, the reality was that incomes were rising faster than levels of productivity. At the start of 1990 incomes rose by 15% whilst productivity experiences zero growth. The Soviet Union's economy was in need of urgent reform.
Economic Reform Plans (1990): initial movement was to reduce state subsidies, first tentative steps towards a maker economy
The USSR Under Pressure - Impact on Cold War
- The internal economic problems of the USSR undermined it's ability to compete in the Cold War envrionment
The Collapse of Comecon?
- The Soviet Union made it clear that cheap exports of fuel and raw materials to eastern Europe could not continue. Unintended outcome of this was to force eastern European countries into closer economic ties with the West.
- Many argue that Comecon did little to create economic unity among eastern bloc states and that its end was the final chapter in the collapse of Soviet power and influence in eastern Europe.