The USSR under pressure

  1. The condition of the Soviet economy
  2. The soviet economy and its impact on the Cold War
HideShow resource information
  • Created by: Tom
  • Created on: 20-04-14 14:35

The condition of the Soviet economy

  • Brezhnev died 1982 - successor Yuri Andropov acknowledged that "there are many problems in our national economy that are overdue for solution. I do not have any receipts for their solution"
  • Soviet economy slowing down during the 1970's
  • GNP 5.2% 1960, 2.7% 1975-80
  • S.U produced 155 million tonnes coal 1977 - U.S 115 million - S.U still forced to import $2billion of steel, tin, steel pipes
  • S.U significantly behind Western states in terms of technology
  • S.U failed to integrate its technical advances from space and military research into the civilian economy
  • 1979-82 world economic recession - during this period, crucial soviet sectors such as oil, coal, iron, steel began to plateu in growth
  • led to industrial decline, had significant impact on economies of East bloc, and this led to weakening of communist control on Eastern bloc
  • for decades S.U had been supplier of cheap fuel for all of Eastern Europe
  • as growth declined, so did S.U capacity to recieve Eastern European manufactured goods
  • decline in flow of trade between S.U and eastern bloc undermined confidence in comm economic system
  • 1980's - growth in agriculture slowed significantly - result of continued droughts/poor harvest
  • 1975 - S.U entered 5-year agreement with U.S to buy 8m tonnes of grain annually
  • unreformed S.U system of collectivised agriculture increased production problems
1 of 12

The condition of the Soviet economy

  • by 1981 detente had drawn to a close and U.S placed trade embargos on the S.U, particularly grain exports
  • end of detente triggered an escalation of nuclear arms race up to 1984
  • 1979 - S.U invaded Afghanistan - added to growing economic costs. Impacted on Soviet people's quality of life
  • 1981 - rate of growth in consumer goods in S.U = 0%
  • major decline in provision of health care and rise in levels of infant mortality
  • Richard Crockatt - " non one would dare claim in 1980 that Krushchev had claimed in 1960: that within a decade the Soviet Union would match and even overtake the United States"
2 of 12

the economy under Gorbachev 1985-90

  • Gorbachev was the person responsible for the irreversible decline that the S.U had reached by the 1990's
  • he didn't plan the collapse, however.
  • Soviet economy = command economy = inflexible system of central planning which rejected innovation and new ideas to maximise productivity
  • Martin Goldman - "Soviet planners were simply unable to keep up with the speed with which one innovation superseded another"
  • central planning focused on large scale production of traditional goods(coal, steel etc) but didn't focus on consumer goods
  • economic crisis did not cause the collapse of Communism by itself
  • However, in conjunction with glasnost(openness) and perestroika(restructuring) it formed a pivotal role.
  • perestroika was the key to Gorbachev's economic reforms, which were designed to improve the performance of the Soviet economy - maximise the potential of the existing economic and production systems
  • the problem was that the existing system was not working and therefore any retantion of that failed system would not work either.
  • Gorbachev linked mediocre economic growth to political, ideological and foreign policy problems
  • If the economy could expand, then all problems would be reduced
  • therefore, if Gorbachev's aims did not work then foreign policy problems would deepen.
  • clear there was a direct link between the S.U's economic performance and S.P status
3 of 12

Industrial efficiency, 1985-7

  • Gorbachev wanted to increase production targets in light industry, machine building, food, meat, dairy products
  • 1985-86 people involved in these areas made more responsible for their targets
  • any profits from over-production put back inj to factories
  • light industries allowed to respond to demands of market
  • May 1986 - quality control system introduced. The Grospriomka
  • widespread opposition and by May 1988 it was withdrawn
4 of 12

Law on Joint Ventures, January 1987

  • allowed foreign ownership on no more than 49% of a business - control remained in hands of state who would have 51%+ share
  • extended to 100% by 1990 - clear example = 1st Mcdonald's in moscow, 1990
  • gradually ended state monopoly and allowed foreign investment
  • also allowed Soviet businesses to enter into competition with West
  • these policies would not be effective while a communist controlled central planning system remained in place as part of the command economy
  • Joint ventures scheme heavily undermined by state - once a business became profitable it was heavily taxed by state
5 of 12

Enterprise Law, January 1988

  • focused on state controlled enterprise and businesses
  • aimed to decentralise authority and devolve decision making down to the business/enterprise themselves
  • significant cut in state subsidies - they were to become profit making organisations
  • degree of independence limited
  • state recieved 85% of production - 15% to anyone else
  • vague element of competition emerged
  • managers were given more control over wage levels - led to increased unemployment as workers laid off for cost efficiency
  • an attempt to operate a command system within a market economy
  • aim of increased independence was good, but method was bad and therefore doomed to failure.
6 of 12

workers' discontent

  • inflation + rising prices made life hard for many
  • July 1989 - coal miners in Kuzbass minefield strike. Poor pay + working conditions. - Strikes spread to Donbas mines and into Pechora and Karaganda - 200k miners involved in industrial action
  • miners called for an end to Communist control over mines. Political control seen as barrier to ch\nge and improvement
  • miners even formed un-official trade union - something never seen ebfore in S.U
  • October 1989 - gov. accepted basic right of workers to strike - strikes remained illegal in key areas
  • Issue underpinning strikes was pay - although incomes were rising faster than olevels of productivity
  • 1990 - incomes rose by 15%, productivity rose by 0%
  • S.U economy in need of urgent reform
7 of 12

economic reform plans, 1990

  • 1989 - economy in generally reasonable condition. Progress slow but present
  • clear there had been a fall in living standards
  • 1988 - Gorbachev acknowledged economy was changing too slowly
  • March 1990 Gorbachev headed Commision for developing a reform package
  • aimed to produce rapid programme of reforms to be in place within a month - underlined urgency of the problems
  • May 1990 - proposals presented to USSR Supreme Soviet
  • initial move was to reduce state subsidies. First step towards a gradual shift to a market economy driven by supply and demand
  • immediate cost of reducing subsidies was increase in price of consumer goods
  • price of bread expected to double
  • increase in non-consumer goods expected to be even higher
  • prospect of high inflation and rising unemployment force Supreme Soviet to call for more restrained plans
8 of 12

the position by 1991

  • S.U economic position critical by 1991
  • GNP fallen by 8%, national income fallen by 10%
  • Industrial + Agricultural output fallen dramatically
  • exports fallen by 33% and 45% reduction in imports
  • S.U's trade with other countries in free fall
  • Crisis complicated by moves toward political decentralisation and rise of nationalism
  • number of republics within union were unwilling to cooperate with centrally planned change and began to withold revenue
  • contributed to significant shortfall in national budget
  • planned spending on military under threat
  • S.U on brink of breaking up and republics increasingly determined to not cooperate with centralising of the economy and centralised economic planning on national level
9 of 12

the soviet economy and its impact on the cold war

  • communist bloc integral part of S.U's international power
  • economic problems within S.U undermined its ability in Cold War environment
  • internal problems also undermined the economic strength of eastern european states
  • organisation that held these diverse economies together was Comecon
10 of 12

the collapse of Comecon

  • June 1984 - Comecon economic summit held in moscow
  • aimed to promote 'intensive growth' through tighter coordination of national economic plans
  • S.U said exports of fueld and raw materials to eastern Europe could not continue
  • forced eastern European states in to stronger economic links with West
  • December 1985 - Comecon called for increased scientific and technical cooperation among member states. Accelerate productivity through rapid advances in technology and innovation
  • plan failed as Communist system was based on centrally planned economic development within each state
  • system isolated states from one another so the idea of cooperation wouldn't work
  • Eastern European states reluctant to contribute to what they saw as schemes promoting Soviet economic interests
  • program only succeeed in weakening link between S.U and Comecon members
  • 1985 - secretary general of Comecon, Sychov, contacted president of European Commission - suggest mutual diplomatic recognition between them. Meant EC members able to set up trade+cooperation agreements with Comecon members. Started with Hungary, 1988.
11 of 12

the collapse of Comecon

  • 1990-91 the final throes of Comecon's demise were enacted
    • December 1989 - S.U announces end of the supply of cheap fuel to Eastern European states
    • 1st january 1991 - all trade between Comecon members was to be driven by market prices rather than through subsidies
    • Comecon formally ended 28th September 1991
  • Comecon did little to create economic unity among eastern bloc. It was final chapter in collapse of Soviet power and influence in Eastern Europe.
12 of 12


No comments have yet been made

Similar History resources:

See all History resources »See all Cold War resources »