THE SOVIET CASE

Prof. Rajarshi Chakraborty

USSR A BRIEF OVEFRVIEW

The Union of Soviet Socialist Republics informally known as the Soviet Union or Soviet Russia, was a constitutionally socialist state that existed on the territory of most of the former Russian Empire in Eurasia between 1922 and 1991 The Soviet Union had a single-party political system dominated by the Communist Party.

Although the USSR was nominally a union of Soviet republics with the capital in Moscow, it was in actuality a highly centralized state with a planned economy.

 The Soviet Union was founded in December 1922 when the Russian SFSR, which formed during the Russian Revolution of 1917 and emerged victorious in the ensuing Russian Civil War, unified with the Transcaucasian, Ukrainian and Belorussian SSRs.
After the death of Vladimir Lenin, the first Soviet leader, power was eventually consolidated by Joseph Stalin, who led the country through a large-scale industrialization with command economy and political repression. During World War II, in June 1941, the Soviet Union was attacked by Germany, a country with whom it had signed a non-aggression pact. After four years of warfare, the Soviet Union emerged as one of the world's two superpowers, extending its influence into much of Eastern Europe and beyond.

 The Soviet Union and its satellites from the Eastern Bloc were one of two participating factions in the Cold War, a global ideological and political struggle against the United States and its allies; the Soviet bloc ultimately lost, however, having been hit by economic standstill and both domestic and foreign political unrest, an event which marks the beginning of the post-war period. In the late 1980s the last Soviet leader Mikhail Gorbachev tried to reform the state with his policies of perestroika and glasnost, but the Soviet Union collapsed and was formally dissolved in December 1991 after the abortive August coup attempt.
Since then the Russian Federation has been exercising its rights and fulfilling its obligations.

RISE OF THE USSR

REASONS
HIGH RATE OF SAVINGS AND INVESTMENTS MORE FOCUS ON INDUSTRIALIZATION AND THE DEVELOPMENT OF MILLITARY EQUIPMENTS. DEVELOPMENT OF SPACE RESEARCH

THE STORY
During the first decade of Soviet rule and up to 1929, the Soviet economy struggled to recover from the damages of World War I, the Revolution, and the civil war, and then to find its way through policy zigzags of the young and inexperienced Soviet leadership.

In 1929 the Soviet Union embarked upon a strategy of rapid economic growth focused mainly on industrialization. The main institutional instrument used in order to implement growth was the Five-Year Plan, the key economic tool of the centrally planned system.

THE STORY
One of the main goals of Soviet communist leadership was rapid economic growth that would equal and eventually surpass the West. The primary aim was to demonstrate the superiority of the communist economic system and growth strategy, based on the teachings of Marx and Lenin, over capitalism. The goal was needed also in order to build a sufficient military power base to avert the perceived military threat of the capitalist world in general, initially that of Nazi Germany.

 Indeed the rates of growth of Soviet GNP were initially, during the 1930s and the first Five-Year Plans, exceptionally high by international comparisons for that period; this made the Soviet model a showcase for imitation to many developing countries that became independent in the aftermath of World WarII. While the Soviet growth rates were still high during the 1950s and 1960s, they were already matched or exceeded at that time by countries such as Germany and Japan, as well as a number of developing countries. The decade of the 1940s, with the devastation of World War II, witnessed stagnation at first and slow growth during the reconstruction efforts later.

Growth somewhat accelerated in the aftermath of the death of Josef Stalin, but from the 1960s onward the rates of economic growth began to fall, declining continuously throughout the rest of the Soviet period down to near zero just before the dissolution of the USSR at the end of 1991. Various efforts at economic reform in order to reverse this trend largely failed. As a result, the entire postwar growth record declined further by international comparisons to below that of most groups of developed as well as developing countries, especially a number of East Asian and Latin American countries. While many developed market economies suffered from business cycles and oscillations in growth rates, they experienced sustained economic growth in the long run. Per contra the fall in Soviet growth rates proved to be terminal.

Thus, although during the early decades the Soviet economy grew fast enough in order to catch up and narrow the gap with the developed countries, during its last decades it fell behind and the gap widened. The growth record with respect to GNP per capita, followed a similar trend of high rates of growth initially, but declined in later decades . While in 1928 the Soviet level of GDP per capita stood around 20 percent of that of the United States, it reached about 30 percent in 1990, probably the best record in terms of comparisons with other Western economies. Throughout the period, the share of private consumption in GNP was lower than in most other nonsocialist countries. Consumption levels did go up significantly from very low levels during the two decades or so following Stalin's death. Also, throughout most of the period, there were relatively high public expenditures of education and health services, which helped to raise the comparative level of welfare and the quality of life. The failure of the communist regime to achieve sustained economic growth on a converging path with developed countries is no doubt the most important reason for the fall of the economy.

FAILURE
The growth record of the Soviet Union - its initial success and eventual failure - is a joint outcome of the selected growth strategy and the system of central planning, including almost full state ownership of the means of production. The centrally planned system was more effective at the start in mobilizing all needed resources, and directing them to the goals of industrialization and growth. The system is also characterized by using commands instead of incentives and decentralized initiatives: emphasis on fulfillment of quantitative production targets rather than on improvements in quality, technology, and efficiency, routine expansion instead of creativity, and rigidity and "more of the same" instead of flexibility - a very high cost for any change. Some of the above characteristics, while advantageous at the start, turned out to be obstacles when the economy developed and became more complex. Other features, such as difficulties in creating indigenous technological innovations, were less harmful initially, when technology could be transferred from abroad, but more of a hindrance later when more domestic efforts were needed.

 The Soviet communist growth strategy, following Marxian doctrine, was based on high rates of investment and a rapid buildup of capital stock.
High rates of investment come at the expense of lower shares of consumption, sacrificed at the beginning in exchange for hopes of abundance in the future.

Central planning, state ownership, and the dictatorship of the proletariat were the necessary tools needed to impose such sacrifices. Next the regime mobilized the maximum possible number of ablebodied men and women to the labor force. A model of growth based mostly on maximum mobilization of capital and labor is called "extensive." The increase in output is achieved mainly through the increase in the amounts of inputs.

THE LABOUR PROBLEM

The problem with extensive growth is that the ability to mobilize more labor and capital is being exhausted over time; furthermore, in both cases early efforts to mobilize more resources backfire by reducing their availability in the future. Labor was mobilized from the start, by moving millions of people from farms to the cities, by obliging all able-bodied, especially women, to join the active labor force, and by limiting the number of people employed in services, forcing families to self-supply services during after-work hours. Very low wages compelled all adult members of the family to seek work.

 The early mobilization of labor and capital inputs at the cost of their future decline is part of a general policy of haste by the Soviet leadership, which was frustrated by declining growth, the inability to provide for defense and other needs, and the failure of partial reforms.
In addition to the above, there were also overuses of natural resources, over-pumping of oil at the expense of future output, neglect of maintenance of infrastructure and of the capital stock, and imposition of taut plans that forced producers to cut corners and neglect longer-term considerations.

Initally this policy of haste produced some incremental growth but at a cost of lower growth later. The results of the policy of haste spilled over to the transition period in the form of major obstacles for renewed economic growth.

MILLITARY BURDEN
The heavy military burden was another significant factor adversely affecting Soviet growth. Early on the Soviet Union was threatened and then attacked by Germany, and following World War II engaged in the Cold War. Throughout the entire period it had to match the military capabilities of larger and more advanced economies, hence to set aside a higher share of its output for defense. During the Soviet system's last decades this share grew to around 15 percent of GNP. This amount was unprecedented in peacetime.

The real defense burden was even heavier than shown by the figures because the defense effort forced the leaders to give priority to defense, in both routine production and in technological efforts, thereby disrupting civilian production and depriving it of significant technological innovation.

OTHER FACTORS
Additional causes of declining growth over time were the deterioration of work motivation and discipline, increasing corruption and illegal activities, declining improvements in the standard of living, and weakening legitimization of the regime. Collective agriculture, the cornerstone of the communist system, became the millstone around its neck.

PERESTROIKA AND GLASNOST

PERESTROIKA
a political movement within the Communist Party of Soviet Union widely associated with the Soviet leader Mikhail Gorbachev. Its literal meaning is "restructuring", referring to the restructuring of the Soviet political and economic system. Perestroika is often argued to be one reason for the fall of socialism in the Soviet Union and Eastern Europe, and for the end of the Cold War

GLASNOST
was the policy of maximal publicity, openness, and transparency in the activities of all government institutions in the Soviet Union, together with freedom of information, introduced by Mikhail Gorbachev in the second half of the 1980s. The word was frequently used by Gorbachev to specify the policies he believed might help reduce the corruption at the top of the Communist Party and the Soviet government, and moderate the abuse of administrative power in the Central Committee

PERESTROIKA AND GLASSNOST

INSTITUTIONAL LAGS

BEREAUCRATIC SABOTAGE

RESISTANCE

AND THAT LEAD TO