Fall of the Soviet Union - Economic weaknesses Flashcards
Why was the economy failing?
The growing crisis in agriculture caused by state inefficiency and inflexibility. The report ‘For internal use only’ was hard to understand for its ageing members or simply chose to ignore them.
What first steps did Gorbachev take in reforming the economy?
There was a campaign to attack the problem of rampant alcoholism, as well as improving the health of the soviet population, the campaign against alcohol would help improve the productivity of the soviet workforce.
Why was alcohol such a problem for the soviet union?
By the mid 1980s, alcohol accounted for 15 percent of household spending. This was partly explained by the lack of other goods in shops, but it had a detrimental effect on the workforce, many of whom turned up to work regularly.
How did Gorbachev counter the problem of alcohol?
- the legal drinking age for consumption of alcohol was raised to 21
- the number of retail outlets where alcohol could be bought was reduced
- vineyards destroyed and distilleries closed
What effect did the reforms on alcohol have?
the costs of vodka tripled and the campaign saw some benefits at first, but the tax revenues that the government gained from alcohol fell remarkedly and caused a serious shortfall in the budget. Drinking levels started to rise after a while as illegal moonshine was produced, it soon became clear that relying on the soviet workforce to become more disciplined and sober would not solve the underlying problems of the soviet economy.
12th five year plan
decided to increase investment in science and research especially in engineering.
What effects did the 12th five year plan have on the economy
- some projects there was overspend
- old factories relied on old equipment which made them increasingly unproductive.
- agriculture had vast sums of investment leading to no improvements in productivity
- the focus was still on quantity over quality, sometimes products were unusable
What else hindered Gorbachev’s policy of acceleration.
The level of opposition to real change and the fact that most of his opposition came from the party and the state economic planning apparatus
How else did acceleration fail?
There was resistance from the military who wanted better technology through investment. They were fighting a war in afgan. Gorbachev also thought it was a good idea for the economy to go in a budget deficit hoping that the economy would improve. Deficit rose from 2.4% to 6.2% of GDP.
Economic perestroika (restructuring)
Gorbachev hoped that by introducing market mechanisms and allowing an element of private enterprise the economy could be revitalised. This would incentivise production and give a greater flexibility in meeting the demands of the economy.
What were the key reforms under perestroika?
- the encouragement of joint ventures to increase access to more modern technology
- the law on state enterprises to reduce the authority of Gosplan
- Co-operatives were legalised
What was the impact of perestroika?
- food production increased from 1% to 2% but still not adequate to feed the population
- Enterprises were still subject to state interference on the allocation of materials
- products were diverted from state shops where prices were low to co-operatives where prices were high, this produced inflation.
- co-operatives also neglected less fortunate cities unadequate food and basic items.
- uncertainty over the supplies meant that hoarding took place and shops were emptied as goods arrived.
Why was perestroika a failure?
- the implementation of electing managers led to steep wages, urban 9% increase in 1988 and 13% in 1989
- foreign companies had to go through endless bureaucracy to establish themselves this put off potential investors. By 1990 there was 3000 enterprises most of these small scale.
- The reforms were often undermined by officials. In some cities they were ignored and others sabotaged
How else was perestroika not helped?
The situation was made worse by a fall in the price of oil, as the USSR relied on oil exports. It counted for 54% of soviet exports.
What state did the 2 sets of reforms leave the economy in?
The reforms had weakened the apparatus of state planning but done little to replace it. By the end of 1889, the soviet economy was massively in debt and close to crisis point. The reforms had made the economy worse, strikes increased from coal miners who were getting unpaid wages and food shortages.
What did these reforms mean for soviet future?
Gorbachev’s failure to bring about an improved economic situation undermined his political power and position. It also led way to one only solution: a dismantling of the soviet economic system.
What ultimately led to the soviet economy collapsing?
One of Gorbachev’s economic advisers out forward the 500 day programme, which recommended a rapid move towards market economy. The plan was rejected by the soviet government but accepted by the Russian parliament. Divisions between the central party leadership and national republics caused chaos and the economy collapsed. Soviet output declined 1/5 from 1990 to 1991
CONTEXT FOR ECONOMIC WEAKNESSES
- War in afghanistan
- failing oil prices
- US embargo on imports of tech to the USSR
- collapse of communist regimes in 1889
