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The economy of the Soviet Union was based on
state ownership State ownership, also called government ownership and public ownership, is the ownership of an industry, asset, or enterprise by the state or a public body representing a community, as opposed to an individual or private party. Public owners ...
of the
means of production The means of production is a term which describes land, labor and capital that can be used to produce products (such as goods or services); however, the term can also refer to anything that is used to produce products. It can also be used as a ...
,
collective farming Collective farming and communal farming are various types of, "agricultural production in which multiple farmers run their holdings as a joint enterprise". There are two broad types of communal farms: agricultural cooperatives, in which member- ...
, and industrial manufacturing. An
administrative-command system The administrative-command system (russian: Административно-командная система, Administrativno-komandnaya sistema), also known as the command-administrative system, is the system of management of an economy of a sta ...
managed a distinctive form of
central planning A planned economy is a type of economic system where investment, production and the allocation of capital goods takes place according to economy-wide economic plans and production plans. A planned economy may use centralized, decentralized, pa ...
. The Soviet economy was characterized by state control of investment, a dependence on natural resources, shortages of many consumer goods, little foreign trade, public ownership of industrial assets, macroeconomic stability, negligible
unemployment Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for work during the refe ...
and high
job security Job security is the probability that an individual will keep their job; a job with a high level of security is such that a person with the job would have a small chance of losing it. Many factors threaten job security: globalization, outsourcing ...
. Beginning in 1930, the course of the economy of the
Soviet Union The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nationa ...
was guided by a series of five-year plans. By the 1950s, the Soviet Union had rapidly evolved from a mainly
agrarian society An agrarian society, or agricultural society, is any community whose economy is based on producing and maintaining crops and farmland. Another way to define an agrarian society is by seeing how much of a nation's total production is in agriculture ...
into a major industrial power. Its transformative capacity meant
communism Communism (from Latin la, communis, lit=common, universal, label=none) is a far-left sociopolitical, philosophical, and economic ideology and current within the socialist movement whose goal is the establishment of a communist society, ...
consistently appealed to the intellectuals of
developing countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
in Asia. Impressive growth rates during the first three five-year plans (1928–1940) are particularly notable given that this period is nearly congruent with the
Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
. During this period, the Soviet Union saw rapid industrial growth while other regions were suffering from crisis. The
White House The White House is the official residence and workplace of the president of the United States. It is located at 1600 Pennsylvania Avenue NW in Washington, D.C., and has been the residence of every U.S. president since John Adams in ...
National Security Council A national security council (NSC) is usually an executive branch governmental body responsible for coordinating policy on national security issues and advising chief executives on matters related to national security. An NSC is often headed by a n ...
of the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
described the continuing growth as a "proven ability to carry backward countries speedily through the crisis of modernization and industrialization", and the impoverished base upon which the five-year plans sought to build meant that at the commencement of
Operation Barbarossa Operation Barbarossa (german: link=no, Unternehmen Barbarossa; ) was the invasion of the Soviet Union by Nazi Germany and many of its Axis allies, starting on Sunday, 22 June 1941, during the Second World War. The operation, code-named afte ...
in 1941 the country was still poor. A major strength of the Soviet economy was its enormous supply of oil and gas, which became much more valuable as exports after the world
price of oil The price of oil, or the oil price, generally refers to the spot price of a barrel () of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent Crude, Dubai Crude, OPEC ...
skyrocketed in the 1970s. As
Daniel Yergin Daniel Howard Yergin (born February 6, 1947) is an American author, speaker, energy expert, and economic historian. Yergin is vice chairman of S&P Global. He was formerly vice chairman of IHS Markit, which merged with S&P in 2022. He founded C ...
notes, the Soviet economy in its final decades was "heavily dependent on vast natural resources–oil and gas in particular". World oil prices collapsed in 1986, putting heavy pressure on the economy. After
Mikhail Gorbachev Mikhail Sergeyevich Gorbachev (2 March 1931 – 30 August 2022) was a Soviet politician who served as the 8th and final leader of the Soviet Union from 1985 to the country's dissolution in 1991. He served as General Secretary of the Com ...
became the
General Secretary of the Communist Party of the Soviet Union A general officer is an officer of high rank in the armies, and in some nations' air forces, space forces, and marines or naval infantry. In some usages the term "general officer" refers to a rank above colonel."general, adj. and n.". OED ...
and came to power in 1985, he began a process of
economic liberalization Economic liberalization (or economic liberalisation) is the lessening of government regulations and restrictions in an economy in exchange for greater participation by private entities. In politics, the doctrine is associated with classical liber ...
by dismantling the
command economy A planned economy is a type of economic system where investment, production and the allocation of capital goods takes place according to economy-wide economic plans and production plans. A planned economy may use centralized, decentralized, p ...
and moving towards a
mixed economy A mixed economy is variously defined as an economic system blending elements of a market economy with elements of a planned economy, markets with state interventionism, or private enterprise with public enterprise. Common to all mixed economie ...
modeled after Lenin's
New Economic Policy The New Economic Policy (NEP) () was an economic policy of the Soviet Union proposed by Vladimir Lenin in 1921 as a temporary expedient. Lenin characterized the NEP in 1922 as an economic system that would include "a free market and capitalism, ...
. At its dissolution at the end of 1991, the Soviet Union begat a
Russian Federation Russia (, , ), or the Russian Federation, is a transcontinental country spanning Eastern Europe and Northern Asia. It is the largest country in the world, with its internationally recognised territory covering , and encompassing one-eig ...
with a growing pile of $66 billion in external debt and with barely a few billion dollars in net gold and foreign exchange reserves.. The complex demands of the modern economy somewhat constrained the central planners. Corruption and data fiddling became common practice among the
bureaucracy The term bureaucracy () refers to a body of non-elected governing officials as well as to an administrative policy-making group. Historically, a bureaucracy was a government administration managed by departments staffed with non-elected offi ...
by reporting fulfilled targets and quotas, thus entrenching the crisis. From the Stalin-era to the early Brezhnev-era, the Soviet economy grew much slower than
Japan Japan ( ja, 日本, or , and formally , ''Nihonkoku'') is an island country in East Asia. It is situated in the northwest Pacific Ocean, and is bordered on the west by the Sea of Japan, while extending from the Sea of Okhotsk in the n ...
and slightly faster than the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
. GDP levels in 1950 (in billion 1990 dollars) were 510 (100%) in the Soviet Union, 161 (100%) in Japan and 1,456 (100%) in the United States. By 1965, the corresponding values were 1,011 (198%), 587 (365%) and 2,607 (179%). The Soviet Union maintained itself as the world's second largest economy in both nominal and purchasing power parity values throughout the
Cold War The Cold War is a term commonly used to refer to a period of geopolitical tension between the United States and the Soviet Union and their respective allies, the Western Bloc and the Eastern Bloc. The term '' cold war'' is used because t ...
, when Japan's economy exceeded $3 trillion in nominal value. The Soviet Union's relatively small consumer sector accounted for just under 60% of the country's GDP in 1990 while the industrial and agricultural sectors contributed 22% and 20% respectively in 1991.
Agriculture Agriculture or farming is the practice of cultivating plants and livestock. Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that enabled people ...
was the predominant occupation in the Soviet Union before the massive industrialization under Soviet general secretary
Joseph Stalin Joseph Vissarionovich Stalin (born Ioseb Besarionis dze Jughashvili; – 5 March 1953) was a Georgian revolutionary and Soviet Union, Soviet political leader who led the Soviet Union from 1924 until his death in 1953. He held power as Ge ...
. The service sector was of low importance in the Soviet Union, with the majority of the labor force employed in the
industrial sector In macroeconomics, the secondary sector of the economy is an economic sector in the three-sector theory that describes the role of manufacturing. It encompasses industries that produce a finished, usable product or are involved in constructi ...
. The labor force totaled 152.3 million people. Though its GDP crossed $1 trillion in the 1970s and $2 trillion in the 1980s, the effects of
central planning A planned economy is a type of economic system where investment, production and the allocation of capital goods takes place according to economy-wide economic plans and production plans. A planned economy may use centralized, decentralized, pa ...
were progressively distorted due to the rapid growth of the
black market A black market, underground economy, or shadow economy is a clandestine market or series of transactions that has some aspect of illegality or is characterized by noncompliance with an institutional set of rules. If the rule defines the ...
informal Formal, formality, informal or informality imply the complying with, or not complying with, some set of requirements (forms, in Ancient Greek). They may refer to: Dress code and events * Formal wear, attire for formal events * Semi-formal attir ...
second economy in the Soviet Union.Vladimir G. Treml and Michael V. Alexeev
"THE SECOND ECONOMY AND THE DESTABILIZING EFFECT OF ITS GROWTH ON THE STATE ECONOMY IN THE SOVIET UNION: 1965–1989"
BERKELEY-DUKE OCCASIONAL PAPERS ON THE SECOND ECONOMY IN THE USSR, Paper No. 36, December 1993


Planning

Based on a system of state ownership, the Soviet economy was managed through
Gosplan The State Planning Committee, commonly known as Gosplan ( rus, Госплан, , ɡosˈpɫan), was the agency responsible for central economic planning in the Soviet Union. Established in 1921 and remaining in existence until the dissolution of ...
(the State Planning Commission),
Gosbank Gosbank (russian: Госбанк, Государственный банк СССР, ''Gosudarstvenny bank SSSR''—the State Bank of the USSR) was the central bank of the Soviet Union and the only bank in the entire country from 1922 to 1991 ...
(the State Bank) and the
Gossnab State Supplies of the USSR, known as the Gossnab of USSR (russian: Госснаб СССР) was active from 1948 to 1953, and 1965 to 1991. It was the state committee for material technical supply in the Soviet Union. It was charged with the prim ...
(State Commission for Materials and Equipment Supply). Beginning in 1928, the economy was directed by a series of five-year plans, with a brief attempt at seven-year planning. For every enterprise, planning ministries (also known as the "fund holders" or ''fondoderzhateli'') defined the mix of economic inputs (e.g. labor and raw materials), a schedule for completion, all
wholesale price Wholesaling or distributing is the sale of goods or merchandise to retailers; to industrial, commercial, institutional or other professional business users; or to other wholesalers (wholesale businesses) and related subordinated services. In ...
s and almost all retail prices. The planning process was based around material balances—balancing economic inputs with planned output targets for the planning period. From 1930 until the late 1950s, the range of mathematics used to assist economic decision-making was, for ideological reasons, extremely restricted.: "The mathematical sophistication of the tools actually employed was limited to those that had been used in ''Das Kapital'': the four arithmetical operations, percentages, and arithmetic (but not geometric) mean." On the whole, the plans were overoptimistic and plagued by falsified reporting. The industry was long concentrated after 1928 on the production of
capital goods The economic concept of a capital good (also called complex product systems (CoPS),H. Rush, "Managing innovation in complex product systems (CoPS)," IEE Colloquium on EPSRC Technology Management Initiative (Engineering & Physical Sciences Researc ...
through
metallurgy Metallurgy is a domain of materials science and engineering that studies the physical and chemical behavior of metallic elements, their inter-metallic compounds, and their mixtures, which are known as alloys. Metallurgy encompasses both the sc ...
, machine manufacture, and chemical industry. In Soviet terminology, goods were known as ''capital''. This emphasis was based on the perceived necessity for very fast industrialization and modernization of the Soviet Union. After the death of
Joseph Stalin Joseph Vissarionovich Stalin (born Ioseb Besarionis dze Jughashvili; – 5 March 1953) was a Georgian revolutionary and Soviet Union, Soviet political leader who led the Soviet Union from 1924 until his death in 1953. He held power as Ge ...
in 1953,
consumer goods A final good or consumer good is a final product ready for sale that is used by the consumer to satisfy current wants or needs, unlike a intermediate good, which is used to produce other goods. A microwave oven or a bicycle is a final good, b ...
(group B goods) received somewhat more emphasis due to the efforts of
Georgy Malenkov Georgy Maximilianovich Malenkov ( – 14 January 1988) was a Soviet politician who briefly succeeded Joseph Stalin as the leader of the Soviet Union. However, at the insistence of the rest of the Presidium, he relinquished control over the p ...
. However, when
Nikita Khrushchev Nikita Sergeyevich Khrushchev (– 11 September 1971) was the First Secretary of the Communist Party of the Soviet Union from 1953 to 1964 and chairman of the country's Council of Ministers from 1958 to 1964. During his rule, Khrushchev s ...
consolidated his power by sacking Malenkov, one of the accusations against him was that he permitted "theoretically incorrect and politically harmful opposition to the rate of development of heavy industry in favor of the rate of development of light and food industry". Since 1955, the priorities were again given to capital goods, which was expressed in the decisions of the 20th Congress of the Communist Party of the Soviet Union (CPSU) in 1956. Economist Naum Jasny says that while many of the official statistics were correctly reported: :The fact is that the most important official general indices of economic development – those of national income, industrial output, real incomes of wage-earners and peasants, labour productivity and production costs in industry – have, over long periods of time....nothing in common with reality. Most information in the Soviet economy flowed from the top down. There were several mechanisms in place for producers and consumers to provide input and information that would help in the drafting of economic plans (as detailed below), but the political climate was such that few people ever provided negative input or criticism of the plan and thus Soviet planners had very little reliable feedback that they could use to determine the success of their plans. This meant that economic planning was often done based on faulty or outdated information, particularly in sectors with large numbers of consumers. As a result, some goods tended to be underproduced and led to shortages while other goods were overproduced and accumulated in storage. Low-level managers often did not report such problems to their superiors, relying instead on each other for support. Some factories developed a system of
barter In trade, barter (derived from ''baretor'') is a system of exchange in which participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists disti ...
and either exchanged or shared raw materials and parts without the knowledge of the authorities and outside the parameters of the economic plan. Heavy industry was always the focus of the Soviet economy even in its later years. The fact that it received special attention from the planners, combined with the fact that industrial production was relatively easy to plan even without minute feedback, led to significant growth in that sector. The Soviet Union became one of the leading industrial nations of the world. Industrial production was disproportionately high in the Soviet Union compared to Western economies. By the 60s calorie consumption per person in the Soviet Union was at levels similar to the United States. However, the production of consumer goods was disproportionately low. Economic planners made little effort to determine the wishes of household consumers, resulting in severe shortages of many consumer goods. Whenever these consumer goods would become available on the market, consumers routinely had to stand in long lines (queues) to buy them. A
black market A black market, underground economy, or shadow economy is a clandestine market or series of transactions that has some aspect of illegality or is characterized by noncompliance with an institutional set of rules. If the rule defines the ...
developed for goods such as
cigarette A cigarette is a narrow cylinder containing a combustible material, typically tobacco, that is rolled into thin paper for smoking. The cigarette is ignited at one end, causing it to smolder; the resulting smoke is orally inhaled via the opp ...
s that were particularly sought after, but it constantly underproduced. People were developing unique social "networks of favors" between people having access to sought after goods (for example, working in particular shops or factories).


Drafting the five-year plans

Under
Joseph Stalin Joseph Vissarionovich Stalin (born Ioseb Besarionis dze Jughashvili; – 5 March 1953) was a Georgian revolutionary and Soviet Union, Soviet political leader who led the Soviet Union from 1924 until his death in 1953. He held power as Ge ...
's close supervision, a complex system of planning arrangements had developed since the introduction of the first five-year plan in 1928. Until the late 1980s and early 1990s, when economic reforms backed by Soviet leader
Mikhail Gorbachev Mikhail Sergeyevich Gorbachev (2 March 1931 – 30 August 2022) was a Soviet politician who served as the 8th and final leader of the Soviet Union from 1985 to the country's dissolution in 1991. He served as General Secretary of the Com ...
introduced significant changes in the traditional system (see
perestroika ''Perestroika'' (; russian: links=no, перестройка, p=pʲɪrʲɪˈstrojkə, a=ru-perestroika.ogg) was a political movement for reform within the Communist Party of the Soviet Union (CPSU) during the late 1980s widely associated wit ...
), the allocation of resources was directed by a planning apparatus rather than through the interplay of market forces.


Time frame

From the Stalin era through the late 1980s, the five-year plan integrated short-range planning into a longer time frame. It delineated the chief thrust of the country's economic development and specified the way the economy could meet the desired goals of the
Communist Party of the Soviet Union " Hymn of the Bolshevik Party" , headquarters = 4 Staraya Square, Moscow , general_secretary = Vladimir Lenin (first) Mikhail Gorbachev (last) , founded = , banned = , founder = Vladimir Lenin , newspape ...
. Although the five-year plan was enacted into law, it contained a series of guidelines rather than a set of direct orders. Periods covered by the five-year plans coincided with those covered by the gatherings of the CPSU Party Congress. At each CPSU Congress, the party leadership presented the targets for the next five-year plan, therefore each plan had the approval of the most authoritative body of the country's leading political institution.


Guidelines for the plan

The Central Committee of the CPSU and more specifically its
Politburo A politburo () or political bureau is the executive committee for communist parties. It is present in most former and existing communist states. Names The term "politburo" in English comes from the Russian ''Politbyuro'' (), itself a contracti ...
set basic guidelines for planning. The Politburo determined the general direction of the economy via control figures (preliminary plan targets), major investment projects (capacity creation) and general economic policies. These guidelines were submitted as a report of the Central Committee to the Congress of the CPSU to be approved there. After the approval at the Congress, the list of priorities for the five-year plan was processed by the
Council of Ministers A council is a group of people who come together to consult, deliberate, or make decisions. A council may function as a legislature, especially at a town, city or county/ shire level, but most legislative bodies at the state/provincial or ...
, which constituted the government of the Soviet Union. The Council of Ministers was composed of industrial ministers, chairmen of various state committees and chairmen of agencies with ministerial status. This committee stood at the apex of the vast economic administration, including the state planning apparatus, the industrial ministries, the trusts (the intermediate level between the ministries and the enterprises) and finally the state enterprises. The Council of Ministers elaborated on Politburo plan targets and sent them to Gosplan, which gathered data on plan fulfillment.


Gosplan

Combining the broad goals laid out by the Council of Ministers with data supplied by lower administrative levels regarding the current state of the economy,
Gosplan The State Planning Committee, commonly known as Gosplan ( rus, Госплан, , ɡosˈpɫan), was the agency responsible for central economic planning in the Soviet Union. Established in 1921 and remaining in existence until the dissolution of ...
worked out through trial and error a set of preliminary plan targets. Among more than twenty state committees, Gosplan headed the government's planning apparatus and was by far the most important agency in the economic administration. The task of planners was to balance resources and requirements to ensure that the necessary inputs were provided for the planned output. The planning apparatus alone was a vast organizational arrangement consisting of councils, commissions, governmental officials, specialists and so on charged with executing and monitoring economic policy. The state planning agency was subdivided into its own industrial departments, such as coal, iron and machine building. It also had summary departments such as finance, dealing with issues that crossed functional boundaries. With the exception of a brief experiment with regional planning during the Khrushchev era in the 1950s, Soviet planning was done on a sectoral basis rather than on a regional basis. The departments of the state planning agency aided the agency's development of a full set of plan targets along with input requirements, a process involving bargaining between the ministries and their superiors. Economic ministries performed key roles in the Soviet organizational structure. When the planning goals had been established by Gosplan, economic ministries drafted plans within their jurisdictions and disseminated planning data to the subordinate enterprises. The planning data were sent downward through the planning hierarchy for progressively more detailed elaboration. The ministry received its control targets, which were then disaggregated by branches within the ministry, then by lower units, eventually until each enterprise received its own control figures (production targets). Enterprises were called upon to develop in the final period of state planning in the late 1980s and early 1990s (even though such participation was mostly limited to a rubber-stamping of prepared statements during huge pre-staged meetings). The enterprises' draft plans were then sent back up through the planning ministries for review. This process entailed intensive bargaining, with all parties seeking the target levels and input figures that best suited their interests. After this bargaining process, Gosplan received the revised estimates and re-aggregated them as it saw fit. The redrafted plan was then sent to the Council of Ministers and the party's Politburo and Central Committee Secretariat for approval. The Council of Ministers submitted the plan to the
Supreme Soviet of the Soviet Union The Supreme Soviet of the Union of Soviet Socialist Republics ( rus, Верховный Совет Союза Советских Социалистических Республик, r=Verkhovnyy Sovet Soyuza Sovetskikh Sotsialisticheskikh Respubl ...
and the Central Committee submitted the plan to the party congress, both for rubber stamp approval. By this time, the process had been completed and the plan became law. The review, revision and approval of the five-year plan were followed by another downward flow of information, this time with the amended and final plans containing the specific targets for each sector of the economy. Implementation began at this point and was largely the responsibility of enterprise managers. The national
state budget A government budget is a document prepared by the government and/or other political entity presenting its anticipated tax revenues (Inheritance tax, income tax, corporation tax, import taxes) and proposed spending/expenditure (Healthcare, Educa ...
was prepared by the Ministry of Finance of the Soviet Union by negotiating with its
all-Union The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nation ...
local organizations. If the state budget was accepted by the Soviet Union, it was then adopted. According to a number of scholars both inside and outside of USSR, it was specifically Soviet-type economic planning combined with political dogmatism which led to gradual degradation of Soviet economy and its collapse.


Agriculture

In the USSR,
agriculture Agriculture or farming is the practice of cultivating plants and livestock. Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that enabled people ...
was organized into a system of collective farms ( ''kolkhozes'') and state farms ( ''sovkhozes''). These farms were collectivized distributed amongst the peasantry and yearly production quotas were set by administrators. Before Stalin, Soviet agriculture held its own. Data from the 1920s infers a positive supply response to increases in the terms of trade. Farmers increased grain sales to urban areas when the price of grain increased. However, at the time, agricultural production was limited by technology, as the whole of Soviet Agriculture relied heavily on animal powered tilling. In the 1930s due to massive famines and animal die offs, the number of remaining animals doing farm work was reduced by half. This indicated the dire need of additional production outputs, which administrators predicted could be supplied by mechanical harvesters. The planning of Soviet leadership emphasized a mechanical agricultural industry, whereby technology and ideology met to create a booming agricultural industry. This way, the technological evolution of Soviet agricultural production could be linked to urban industry. Yet in reality, Soviet planners were more invested in industry than farmers, and the Soviet agricultural industry suffered as a result. Stalin's first Five year Plan (1929-1933) was a colossal failure. Soviet population declined after 1933, and would see modest growth until 1936. The figures suggest a gap of about 15 million people between anticipated population and those that survived the five-year plan. Systemic inefficiencies plagued Soviet agriculture, such as obsolete technology, waste of fuel resources, and depreciating capital stock. These inefficiencies clogged the Soviet agricultural machine and reduced output. Additionally, climate greatly affected Soviet agricultural output. Many regions throughout the USSR had little rainfall, short growing seasons, low temperatures, and general extremes unsuitable for optimal agricultural production. This was detrimental to agricultural output and prevented cost minimization. When harvests fell short of production quotas due to a sudden frost or long drought, Soviet output could not make up the difference. Consequently, when agriculture was not producing as promised, some peasants refused to work over fear of starvation. However, since Soviet farms were collectivized, no individual grievances could be tolerated for the societal system to succeed. As a result, peasants unwilling to join ''kolkhozy'' were forced off of their land, which was then redistributed to other peasants. Following previous agricultural failures, Khrushchev abandoned Stalin's agricultural model. He instead looked comparatively at American agriculture through Soviet observers. He noticed that American agriculture flourished due to its specialization and interdependence on other farmers for goods and services. Similarly, Soviet farms could specialize in the crop which was best suited for growing in their region, and surplus could be transported throughout the USSR to satisfy quotas and distribute to people who needed the food. Khrushchev himself tended to suggest his favorite crops such as corn for planters. Paired with a need to proselytize mechanized agriculture to nearby countries, the Khrushchev administration began a campaign for an optimistic future of mechanized Soviet agriculture. However, Khrushchev was not able to fulfill his promises, and this contributed to his rising unpopularity which culminated in his removal from power. Following Khrushchev's leadership, Soviet agriculture's legacy was defined by patchwork that attempted to fix the mistakes of the previous administrations. Crop harvests, tractors, fertilizer, and capital investment were all increasing since 1955.  By 1965, the output of the Soviet worker was increasing, but still well below average for a developed country. Problems such as a scarcity of educated workers, saturation of unskilled workers and jobs made obsolete by technology, and poorly trained and educated farmers brought costs up and drove production down. These issues prevented the Soviet Union from producing enough food, as a lack of administration and management led to the mismanagement of farms and reduced worker productivity. From 1972 to 1986, the Soviet Union failed to produce more wheat than the Western European average. This failure to produce resulted in forced Soviet imports of food. Between 1961 and 1985, Soviet food imports from foreign producers cost a total of nearly 240 billion dollars. The root of this expense can be identified in the inefficiencies of the Soviet agricultural sector, such as the shortage of workers, lag in technology, or natural factors such as drought or frosts. Although the Soviet Union aimed to establish a mechanized agricultural giant, the shortcomings of Soviet agriculture put the sector behind other countries from the beginning. Soviet agriculture had the inability to meet basic consumer demands and expectations, requiring policy change culminating in the dissolution of the USSR in 1991.


Foreign trade and currency

Largely self-sufficient, the Soviet Union traded little in comparison to its economic strength. However, trade with noncommunist countries increased in the 1970s as the government sought to compensate gaps in domestic production with imports. In general,
fuel A fuel is any material that can be made to react with other substances so that it releases energy as thermal energy or to be used for work. The concept was originally applied solely to those materials capable of releasing chemical energy b ...
s,
metal A metal (from ancient Greek, Greek μέταλλον ''métallon'', "mine, quarry, metal") is a material that, when freshly prepared, polished, or fractured, shows a lustrous appearance, and conducts electrical resistivity and conductivity, e ...
s and
timber Lumber is wood that has been processed into dimensional lumber, including beams and planks or boards, a stage in the process of wood production. Lumber is mainly used for construction framing, as well as finishing (floors, wall panels, w ...
were exported.
Machinery A machine is a physical system using power to apply forces and control movement to perform an action. The term is commonly applied to artificial devices, such as those employing engines or motors, but also to natural biological macromolecul ...
,
consumer goods A final good or consumer good is a final product ready for sale that is used by the consumer to satisfy current wants or needs, unlike a intermediate good, which is used to produce other goods. A microwave oven or a bicycle is a final good, b ...
and sometimes
grain A grain is a small, hard, dry fruit ( caryopsis) – with or without an attached hull layer – harvested for human or animal consumption. A grain crop is a grain-producing plant. The two main types of commercial grain crops are cereals and legum ...
were imported. In the 1980s trade with the
Council for Mutual Economic Assistance The Council for Mutual Economic Assistance (, ; English abbreviation COMECON, CMEA, CEMA, or CAME) was an economic organization from 1949 to 1991 under the leadership of the Soviet Union that comprised the countries of the Eastern Bloc along wit ...
(COMECON) member states accounted for about half the country's volume of trade. The Soviet rouble was non-convertible after 1932 (when trade in gold-convertible
chervonets Chervonets is the traditional Russian name for large foreign, and domestic gold coins. The name comes from the Russian term ''"червонное золото"'' ("chervonnoye zoloto"), meaning “red gold" (also known as rose gold) – the o ...
, introduced by Lenin in the
New Economic Policy The New Economic Policy (NEP) () was an economic policy of the Soviet Union proposed by Vladimir Lenin in 1921 as a temporary expedient. Lenin characterized the NEP in 1922 as an economic system that would include "a free market and capitalism, ...
years, was suspended) until the late 1980s. It was impossible (both for citizens and state-owned businesses) to freely buy or sell foreign currency even though the "exchange rate" was set and published regularly. Buying or selling foreign currency on a black market was a serious crime until the late 1980s. Individuals who were paid from abroad (for example writers whose books were published abroad) normally had to spend their currency in a foreign-currency-only chain of state-owned Beryozka ("Birch-tree") stores. Once a free conversion of currency was allowed, the exchange rate plummeted from its official values by almost a factor of 10. Overall, the banking system was highly centralized and fully controlled by a single state-owned
Gosbank Gosbank (russian: Госбанк, Государственный банк СССР, ''Gosudarstvenny bank SSSR''—the State Bank of the USSR) was the central bank of the Soviet Union and the only bank in the entire country from 1922 to 1991 ...
, responsive to the fulfillment of the government's economic plans. Soviet
bank A bank is a financial institution that accepts Deposit account, deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital m ...
s furnished short-term credit to state-owned enterprises.


Forms of property

There were two basic forms of property in the Soviet Union: individual property and collective property. These differed greatly in their content and legal status. According to communist theory, capital (
means of production The means of production is a term which describes land, labor and capital that can be used to produce products (such as goods or services); however, the term can also refer to anything that is used to produce products. It can also be used as a ...
) should not be individually owned, with certain negligible exceptions. In particular, after the end of a short period of the
New Economic Policy The New Economic Policy (NEP) () was an economic policy of the Soviet Union proposed by Vladimir Lenin in 1921 as a temporary expedient. Lenin characterized the NEP in 1922 as an economic system that would include "a free market and capitalism, ...
and with
collectivization Collective farming and communal farming are various types of, "agricultural production in which multiple farmers run their holdings as a joint enterprise". There are two broad types of communal farms: agricultural cooperatives, in which member- ...
completed, all industrial property and virtually all land were collective. Land in rural areas was allotted for housing and some sustenance farming, and persons had certain rights to it, but it was not their property in full. In particular, in
kolkhoz A kolkhoz ( rus, колхо́з, a=ru-kolkhoz.ogg, p=kɐlˈxos) was a form of collective farm in the Soviet Union. Kolkhozes existed along with state farms or sovkhoz., a contraction of советское хозяйство, soviet ownership or ...
es and
sovkhoz A sovkhoz ( rus, совхо́з, p=sɐfˈxos, a=ru-sovkhoz.ogg, abbreviated from ''советское хозяйство'', "sovetskoye khozyaystvo (sovkhoz)"; ) was a form of state-owned farm in the Soviet Union. It is usually contrasted wit ...
es there was a practice to rotate individual farming lots with collective lots. This resulted in situations where people would ameliorate, till and cultivate their lots carefully, adapting them to small-scale farming and in 5–7 years those lots would be swapped for kolkhoz ones, typically with exhausted soil due to intensive, large-scale agriculture . There was an extremely small number of remaining individual farmsteads (''
khutor A khutor ( rus, хутор, p=ˈxutər) or khutir ( uk, хутiр, pl. , ''khutory'') is a type of rural locality in some countries of Eastern Europe; in the past the term mostly referred to a single- homestead settlement.
s''; хутор), located in isolated rural areas in the Baltic states,
Ukraine Ukraine ( uk, Україна, Ukraïna, ) is a country in Eastern Europe. It is the second-largest European country after Russia, which it borders to the east and northeast. Ukraine covers approximately . Prior to the ongoing Russian inva ...
,
Siberia Siberia ( ; rus, Сибирь, r=Sibir', p=sʲɪˈbʲirʲ, a=Ru-Сибирь.ogg) is an extensive geographical region, constituting all of North Asia, from the Ural Mountains in the west to the Pacific Ocean in the east. It has been a part ...
and
cossack The Cossacks , es, cosaco , et, Kasakad, cazacii , fi, Kasakat, cazacii , french: cosaques , hu, kozákok, cazacii , it, cosacchi , orv, коза́ки, pl, Kozacy , pt, cossacos , ro, cazaci , russian: казаки́ or ...
lands.


Individual property

To distinguish "capitalist" and "socialist" types of property ownership further, two different forms of individual property were recognized: private property (частная собственность, ''chastnaya sobstvennost'') and personal property (личная собственность, ''lichnaya sobstvennost''). The former encompassed capital (means of production) while the latter described everything else in a person's possession.


Collective property

There were several forms of collective ownership, the most significant being state property, ''kolkhoz'' property and cooperative property. The most common forms of cooperative property were housing cooperatives (жилищные кооперативы) in urban areas, consumer cooperatives (потребительская кооперация, потребкооперация) and rural consumer societies (сельские потребительские общества, сельпо).


History

''See also History of the Soviet Union''


Early development

Both the
Russian Soviet Federative Socialist Republic The Russian Soviet Federative Socialist Republic, Russian SFSR or RSFSR ( rus, Российская Советская Федеративная Социалистическая Республика, Rossíyskaya Sovétskaya Federatívnaya Soci ...
and later the
Soviet Union The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nationa ...
were countries in the process of
industrialization Industrialisation ( alternatively spelled industrialization) is the period of social and economic change that transforms a human group from an agrarian society into an industrial society. This involves an extensive re-organisation of an econo ...
. For both, this development occurred slowly and from a low initial starting-point. Because of
World War I World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was List of wars and anthropogenic disasters by death toll, one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, ...
(1914–1918), the
Russian Revolution The Russian Revolution was a period of political and social revolution that took place in the former Russian Empire which began during the First World War. This period saw Russia abolish its monarchy and adopt a socialist form of government ...
of 1917 and the ensuing
Russian Civil War {{Infobox military conflict , conflict = Russian Civil War , partof = the Russian Revolution and the aftermath of World War I , image = , caption = Clockwise from top left: {{flatlist, *Soldiers ...
(1917–1922), industrial production had only managed to barely recover its 1913 level by 1926. By this time, about 18% of the population lived in non-rural areas, although only about 7.5% were employed in the non-agricultural sector. The remainder remained stuck in low-productivity agriculture. David A. Dyker sees the Soviet Union of circa 1930 as in some ways a typical developing country, characterized by low capital-investment and with most of its population residing in the countryside. Part of the reason for low investment-rates lay in the inability to acquire capital from abroad. This in turn, resulted from the repudiation of the debts of the
Russian Empire The Russian Empire was an empire and the final period of the Russian monarchy from 1721 to 1917, ruling across large parts of Eurasia. It succeeded the Tsardom of Russia following the Treaty of Nystad, which ended the Great Northern War ...
by the
Bolsheviks The Bolsheviks (russian: Большевики́, from большинство́ ''bol'shinstvó'', 'majority'),; derived from ''bol'shinstvó'' (большинство́), "majority", literally meaning "one of the majority". also known in English ...
in 1918 as well as from the worldwide financial troubles. Consequently, any kind of economic growth had to be financed by domestic savings. The economic problems in agriculture were further exacerbated by natural conditions, such as long cold winters across the country, droughts in the south and acidic soils in the north. However, according to Dyker, the Soviet economy did have "extremely good" potential in the area of raw materials and mineral extraction, for example in the oil fields in
Transcaucasia The South Caucasus, also known as Transcaucasia or the Transcaucasus, is a geographical region on the border of Eastern Europe and Western Asia, straddling the southern Caucasus Mountains. The South Caucasus roughly corresponds to modern Arme ...
, and this, along with a small but growing manufacturing base, helped the Soviet Union avoid any kind of
balance of payments In international economics, the balance of payments (also known as balance of international payments and abbreviated BOP or BoP) of a country is the difference between all money flowing into the country in a particular period of time (e.g., ...
problems.


New Economic Policy (1921–1929)

By early 1921, it became apparent to the Bolsheviks that forced requisitioning of grain had resulted in low agricultural production and widespread opposition. As a result, the decision was made by Lenin and the Politburo to try an alternative approach. The so-called
New Economic Policy The New Economic Policy (NEP) () was an economic policy of the Soviet Union proposed by Vladimir Lenin in 1921 as a temporary expedient. Lenin characterized the NEP in 1922 as an economic system that would include "a free market and capitalism, ...
(NEP) was approved at the 10th Congress of the Russian Communist Party (Bolsheviks). Everything except "the commanding heights", as Lenin put it, of the economy would be
privatized Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...
. The commanding heights included
foreign trade International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (see: World economy) In most countries, such trade represents a significant ...
,
heavy industry Heavy industry is an industry that involves one or more characteristics such as large and heavy products; large and heavy equipment and facilities (such as heavy equipment, large machine tools, huge buildings and large-scale infrastructure); o ...
,
communication Communication (from la, communicare, meaning "to share" or "to be in relation with") is usually defined as the transmission of information. The term may also refer to the message communicated through such transmissions or the field of inqui ...
and
transport Transport (in British English), or transportation (in American English), is the intentional movement of humans, animals, and goods from one location to another. Modes of transport include air, land ( rail and road), water, cable, pipelin ...
among others. In practice this limited the private sector to artisan and agricultural production/trade.Carr, E.H. and Davies, R.W, (1988), Foundations of a Planned Economy, Vol. 1 The NEP encountered strong resistance within the Bolshevik party. Lenin had to persuade communist skeptics that "
state capitalism State capitalism is an economic system in which the state undertakes business and commercial (i.e. for-profit) economic activity and where the means of production are nationalized as state-owned enterprises (including the processes of capital ...
" was a necessary step in achieving
communism Communism (from Latin la, communis, lit=common, universal, label=none) is a far-left sociopolitical, philosophical, and economic ideology and current within the socialist movement whose goal is the establishment of a communist society, ...
, while he himself harbored suspicions that the policy could be abused by private businessmen ("
NEPmen NEPmen (russian: Нэпманы, translit=Nepmani) were businesspeople in the early Soviet Union, who took advantage of the opportunities for private trade and small-scale manufacturing provided under the New Economic Policy (NEP, 1921-1928). The ...
"). As
novelist A novelist is an author or writer of novels, though often novelists also write in other genres of both fiction and non-fiction. Some novelists are professional novelists, thus make a living writing novels and other fiction, while others aspire ...
Andrei Platonov Andrei Platonov (russian: Андре́й Плато́нов, ; – 5 January 1951) was the pen name of Andrei Platonovich Klimentov (russian: Андре́й Плато́нович Климе́нтов), a Soviet Russian writer, philosopher, pla ...
, among others, noted, the improvements were immediate. Rationing cards and queues, which had become
hallmark A hallmark is an official mark or series of marks struck on items made of metal, mostly to certify the content of noble metals—such as platinum, gold, silver and in some nations, palladium. In a more general sense, the term '' hallmark'' can a ...
s of
war communism War communism or military communism (russian: Военный коммунизм, ''Voyennyy kommunizm'') was the economic and political system that existed in Soviet Russia during the Russian Civil War from 1918 to 1921. According to Soviet histo ...
, had disappeared. However, due to prolonged war, low harvests, and several natural disasters the Soviet economy was still in trouble, particularly its agricultural sector. In 1921, widespread famine broke out in the
Volga-Ural region Idel-Ural ( tt-Cyrl, Идел-Урал, translit=Idel-Üral, russian: Идель-Урал), literally Volga-Ural, is a historical region in Eastern Europe, in what is today Russia. The name literally means ''Volga-Urals'' in the Tatar language. T ...
. The Soviet government changed its previous course and allowed international relief to come in from abroad, and established a special committee chaired by prominent communists and non-communists alike. Despite this, an estimated five million people died in the famine.


Armenian Soviet Socialist Republic

The Soviet-era republic's centralized economy forbade private ownership of property with an income. Privately owned farms in Armenia were collectivized and put under the control of the state starting in the late 1920s, however this was frequently met with vigorous opposition by the peasantry. During the same period (1929–1936), Armenia's industrialization process was also launched by the government.The socialist economic system and socialist ownership of the means of production, which come in two forms: state property and cooperative and collective-farm property, form the basis of the republic's economy. The legislation authorizes small private ventures of individual peasants and craftsmen based on their own labor and forbids the exploitation of the labor of others, in addition to the socialist system of economy, which is the major type of economy in the Republic. The official economic plan sets and directs the Republic's economic course. By 1935, the gross product of agriculture was 132% higher than that of 1928, and the gross product of industry was 650% more than that of 1928.However, the 1930s economic revolution came at a high price: it destroyed the conventional peasant family and village institution and caused many people who lived in the remote countryside to relocate to cities. As private enterprise was essentially brought under government control, it came to an end.


Stalinism

Starting in 1928, the five-year plans began building a heavy industrial base at once in an underdeveloped economy without waiting years for capital to accumulate through the expansion of light industry, and without reliance on external financing. The New Economic Policy was rapidly abandoned and replaced by
Stalinism Stalinism is the means of governing and Marxist-Leninist policies implemented in the Soviet Union from 1927 to 1953 by Joseph Stalin. It included the creation of a one-party totalitarian police state, rapid industrialization, the the ...
. The country now became industrialized at a hitherto unprecedented pace, surpassing
Germany Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwee ...
's pace of industrialization in the 19th century and
Japan Japan ( ja, 日本, or , and formally , ''Nihonkoku'') is an island country in East Asia. It is situated in the northwest Pacific Ocean, and is bordered on the west by the Sea of Japan, while extending from the Sea of Okhotsk in the n ...
's earlier in the 20th century. After the reconstruction of the economy in the wake of the destruction caused by the
Russian Civil War {{Infobox military conflict , conflict = Russian Civil War , partof = the Russian Revolution and the aftermath of World War I , image = , caption = Clockwise from top left: {{flatlist, *Soldiers ...
was completed and after the initial plans of further
industrialization Industrialisation ( alternatively spelled industrialization) is the period of social and economic change that transforms a human group from an agrarian society into an industrial society. This involves an extensive re-organisation of an econo ...
were fulfilled, the explosive growth slowed down until the period of Brezhnev stagnation in the 1970s and 1980s. Led by the creation of NAMI and by the GAZ copy of the Ford Model A in 1929, industrialization came with the extension of medical services, which improved labor
productivity Productivity is the efficiency of production of goods or services expressed by some measure. Measurements of productivity are often expressed as a ratio of an aggregate output to a single input or an aggregate input used in a production proces ...
. Campaigns were carried out against
typhus Typhus, also known as typhus fever, is a group of infectious diseases that include epidemic typhus, scrub typhus, and murine typhus. Common symptoms include fever, headache, and a rash. Typically these begin one to two weeks after exposure. ...
,
cholera Cholera is an infection of the small intestine by some strains of the bacterium '' Vibrio cholerae''. Symptoms may range from none, to mild, to severe. The classic symptom is large amounts of watery diarrhea that lasts a few days. Vomiting an ...
and
malaria Malaria is a mosquito-borne infectious disease that affects humans and other animals. Malaria causes symptoms that typically include fever, tiredness, vomiting, and headaches. In severe cases, it can cause jaundice, seizures, coma, or death. ...
; the number of physicians increased as rapidly as facilities and training would permit; and death and
infant mortality Infant mortality is the death of young children under the age of 1. This death toll is measured by the infant mortality rate (IMR), which is the probability of deaths of children under one year of age per 1000 live births. The under-five morta ...
rates steadily decreased.


1930–1970

As weighed growth rates, economic planning performed very well during the early and mid-1930s,
World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the World War II by country, vast majority of the world's countries—including all of the great power ...
-era mobilization, and for the first two decades of the postwar era. The Soviet Union became the world's leading producer of
oil An oil is any nonpolar chemical substance that is composed primarily of hydrocarbons and is hydrophobic (does not mix with water) & lipophilic (mixes with other oils). Oils are usually flammable and surface active. Most oils are unsaturated ...
,
coal Coal is a combustible black or brownish-black sedimentary rock, formed as rock strata called coal seams. Coal is mostly carbon with variable amounts of other elements, chiefly hydrogen, sulfur, oxygen, and nitrogen. Coal is formed when ...
,
iron ore Iron ores are rocks and minerals from which metallic iron can be economically extracted. The ores are usually rich in iron oxides and vary in color from dark grey, bright yellow, or deep purple to rusty red. The iron is usually found in the ...
and
cement A cement is a binder, a chemical substance used for construction that sets, hardens, and adheres to other materials to bind them together. Cement is seldom used on its own, but rather to bind sand and gravel (aggregate) together. Cement mixe ...
;
manganese Manganese is a chemical element with the Symbol (chemistry), symbol Mn and atomic number 25. It is a hard, brittle, silvery metal, often found in minerals in combination with iron. Manganese is a transition metal with a multifaceted array of ...
,
gold Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile ...
,
natural gas Natural gas (also called fossil gas or simply gas) is a naturally occurring mixture of gaseous hydrocarbons consisting primarily of methane in addition to various smaller amounts of other higher alkanes. Low levels of trace gases like carbon d ...
and other
minerals In geology and mineralogy, a mineral or mineral species is, broadly speaking, a solid chemical compound with a fairly well-defined chemical composition and a specific crystal structure that occurs naturally in pure form.John P. Rafferty, ed ...
were also of major importance. However, information about the
Soviet famine of 1932–1933 The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nationa ...
was suppressed by the Soviet authorities until
perestroika ''Perestroika'' (; russian: links=no, перестройка, p=pʲɪrʲɪˈstrojkə, a=ru-perestroika.ogg) was a political movement for reform within the Communist Party of the Soviet Union (CPSU) during the late 1980s widely associated wit ...
. To some estimations, in 1933 workers' real earnings sank on more than 11.4% from 1926 level, though it needs an adjustment due to elimination of unemployment and perks at work (such as inexpensive meals). Common and political prisoners in labor camps were forced to do unpaid labor and communists and
Komsomol The All-Union Leninist Young Communist League (russian: link=no, Всесоюзный ленинский коммунистический союз молодёжи (ВЛКСМ), ), usually known as Komsomol (; russian: Комсомол, links=n ...
members were frequently "mobilized" for various construction projects. The German invasion of World War II inflicted punishing blows to the economy of the Soviet Union, with Soviet GDP falling 34% between 1940 and 1942. Industrial output did not recover to its 1940 level for almost a decade. In 1961, a new redenominated
Soviet rouble The ruble or rouble (russian: рубль) was the currency of the Soviet Union, introduced in 1922, replacing the Imperial Russian ruble. One ruble was divided into 100 kopecks ( – ''kopeyka'', ''kopeyki''). Soviet banknotes and coins were pr ...
was issued with an exchange rate of £1 = Rbl 1. The rouble maintained exchange parity with sterling until the dissolution of the Soviet Union in 1991. After a new leadership, headed by
Leonid Brezhnev Leonid Ilyich Brezhnev; uk, links= no, Леонід Ілліч Брежнєв, . (19 December 1906– 10 November 1982) was a Soviet politician who served as General Secretary of the Communist Party of the Soviet Union between 1964 and 1 ...
, had come to power, attempts were made to revitalize the economy through economic reform. Starting in 1965, enterprises and organizations were made to rely on economic methods of profitable production, rather than follow orders from the state administration. By 1970, the Soviet economy had reached its zenith and was estimated at 60 percent of the size of the United States in terms of the estimated commodities (like steel and coal). In 1989, the official GDP of the Soviet Union was $2,500 billion while the GDP of the United States was $4,862 billion with per capita income figures as $8,700 and $19,800 respectively.


1970–1990

The value of all consumer goods manufactured in 1972 in retail prices was about 118 billion roubles ($530 billion). The Era of Stagnation in the mid-1970s was triggered by the Nixon Shock and aggravated by the
war in Afghanistan War in Afghanistan, Afghan war, or Afghan civil war may refer to: *Conquest of Afghanistan by Alexander the Great (330 BC – 327 BC) * Muslim conquests of Afghanistan (637–709) *Conquest of Afghanistan by the Mongol Empire (13th century), see al ...
in 1979 and led to a period of economic standstill between 1979 and 1985. Soviet military buildup at the expense of domestic development kept the Soviet Union's GDP at the same level during the first half of the 1980s. The Soviet planned economy was not structured to respond adequately to the demands of the complex modern economy it had helped to forge. The massive quantities of goods produced often did not meet the needs or tastes of consumers. The volume of decisions facing planners in Moscow became overwhelming. The cumbersome procedures for bureaucratic administration foreclosed the free communication and flexible response required at the enterprise level for dealing with worker alienation, innovation, customers, and suppliers. During 1975–1985, corruption and data fiddling became common practice among bureaucracy to report satisfied targets and quotas thus entrenching the crisis. At the same time, the effects of the central planning were progressively distorted due to the rapid growth of the second economy in the Soviet Union. While all modernized economies were rapidly moving to computerization after 1965, the Soviet Union fell further and further behind. Moscow's decision to copy the IBM 360 of 1965 proved a decisive mistake, for it locked scientists into an antiquated system they were unable to improve. They had enormous difficulties in manufacturing the necessary chips reliably and in quantity, in programming workable and efficient programs, in coordinating entirely separate operations, and in providing support to computer users. One of the greatest strengths of Soviet economy was its vast supplies of oil and gas; world oil prices quadrupled in the 1973–1974 and rose again in 1979–1981, making the energy sector the chief driver of the Soviet economy, and was used to cover multiple weaknesses. At one point, Soviet Premier
Alexei Kosygin Alexei Nikolayevich Kosygin ( rus, Алексе́й Никола́евич Косы́гин, p=ɐlʲɪkˈsʲej nʲɪkɐˈla(j)ɪvʲɪtɕ kɐˈsɨɡʲɪn; – 18 December 1980) was a Soviet statesman during the Cold War. He served as the Premi ...
told the head of oil and gas production that "things are bad with bread. Give me 3 million tons f oilover the plan". In 2007, economist and former
Prime Minister A prime minister, premier or chief of cabinet is the head of the cabinet and the leader of the ministers in the executive branch of government, often in a parliamentary or semi-presidential system. Under those systems, a prime minister is ...
Yegor Gaidar Yegor Timurovich Gaidar (russian: link=no, Его́р Тиму́рович Гайда́р; ; 19 March 1956 – 16 December 2009) was a Soviet and Russian economist, politician, and author, and was the Acting Prime Minister of Russia from 15 Ju ...
wrote the following about looking back to these three decades: Awareness of the growing crisis arose initially within the KGB which with its extensive network of informants in every region and institution had its finger on the pulse of the nation.
Yuri Andropov Yuri Vladimirovich Andropov (– 9 February 1984) was the sixth paramount leader of the Soviet Union and the fourth General Secretary of the Communist Party of the Soviet Union. After Leonid Brezhnev's 18-year rule, Andropov served in the ...
, director of the KGB, created a secret department during the 1970s within the KGB devoted to economic analysis and when he succeeded Brezhnev in 1982 sounded the alarm forcefully to the Soviet leadership. However, Andropov's remedy of increased discipline proved ineffective. It was only when Andropov's protege Gorbachev assumed power that a determined, but ultimately unsuccessful, assault on the economic crisis was undertaken. The value of all consumer goods manufactured in 1990 in retail prices was about 459 billion roubles ($2.1 trillion). According to CIA estimates, by 1989 the size of the Soviet economy was roughly half that in the United States.


Comparisons with other countries

File:Soviet Union USSR GDP per capita.png, GDP per capita of the Soviet Union File:Real GDP per capitas of countries relative to the US' MDP.png, GDP per capita of the Soviet Union and other countries relative to the United States' File:FormerUSSRRepublicsGDPPC.svg, GDP per capita of the
Soviet republics The Republics of the Union of Soviet Socialist Republics or the Union Republics ( rus, Сою́зные Респу́блики, r=Soyúznye Respúbliki) were national-based administrative units of the Union of Soviet Socialist Republics ( ...
after the
dissolution of the Soviet Union The dissolution of the Soviet Union, also negatively connoted as rus, Разва́л Сове́тского Сою́за, r=Razvál Sovétskogo Soyúza, ''Ruining of the Soviet Union''. was the process of internal disintegration within the Sov ...


See also

*
Second economy of the Soviet Union The second economy in the Soviet Union was black market or the informal sector in the economy of the Soviet Union. The term was suggested by Gregory Grossman in his seminal article, "The Second Economy of the USSR" (1977).
*
1965 Soviet economic reform The 1965 Soviet economic reform, sometimes called the Kosygin reform () or Liberman reform, was a set of planned changes in the economy of the USSR. A centerpiece of these changes was the introduction of profitability and sales as the two key in ...
*
1973 Soviet economic reform The 1973 Soviet economic reform was an economic reform initiated by Alexei Kosygin, the Chairman of the Council of Ministers. During Leonid Brezhnev's rule of the Union of Soviet Socialist Republics (USSR), the Soviet economy began to stagnate; t ...
*
1979 Soviet economic reform The 1979 Soviet economic reform, or "Improving planning and reinforcing the effects of the economic mechanism on raising the effectiveness in production and improving the quality of work", was an economic reform initiated by Alexei Kosygin, the Ch ...
* * * *
Bureaucratic collectivism Bureaucratic collectivism is a theory of class society. It is used by some Trotskyists to describe the nature of the Soviet Union under Joseph Stalin and other similar states in Central and Eastern Europe and elsewhere (such as North Korea). Th ...
* Administrative command economy * Eastern Bloc economies *
Enterprises in the Soviet Union Enterprises in the Soviet Union were legal entities engaged in some kind of economic activity, such as production, distribution, the provision of services, or any other economic operation. An enterprise was the general equivalent of "company", w ...
* Five-year plans * State Planning Committee *
Material balance planning Material balances are a method of economic planning where material supplies are accounted for in natural units (as opposed to using monetary accounting) and used to balance the supply of available inputs with targeted outputs. Material balancing ...
* Soviet Ministry of Finance * * Soviet-type economic planning *
State capitalism State capitalism is an economic system in which the state undertakes business and commercial (i.e. for-profit) economic activity and where the means of production are nationalized as state-owned enterprises (including the processes of capital ...
*
State socialism State socialism is a political and economic ideology within the socialist movement that advocates state ownership of the means of production. This is intended either as a temporary measure, or as a characteristic of socialism in the transition ...
*
Trade unions in the Soviet Union Trade unions in the Soviet Union, headed by the All-Union Central Council of Trade Unions (VTsSPS or ACCTU in English), had a complex relationship with industrial management, the Communist Party of the Soviet Union, and the Soviet government, giv ...


References


Works cited

* * * * * * * *


Further reading

* Autio-Sarasmo, Sari. "Technological Modernisation in the Soviet Union and Post-Soviet Russia: Practices and Continuities." ''Europe-Asia Studies'' 68.1 (2016): 79-96. * Bergson, Abram. ''The real national income of Soviet Russia since 1928'' (1961) * Connolly, Richard. ''The Russian Economy: A Very Short Introduction'' (Oxford University Press, 2020)
Online review
* * Davies, R. W. ''Soviet economic development from Lenin to Khrushchev'' (1998
excerpt
* Davies, R. W. ed. ''From Tsarism to the New Economic Policy: Continuity and Change in the Economy of the USSR'' (London, 1990). * Davies, R. W. ed. ''The Economic Transformation of the Soviet Union, 1913–1945'' (Cambridge, 1994). * Goldman, Marshall (1994). ''Lost Opportunity: Why Economic Reforms in Russia Have Not Worked''. New York: W. W. Norton. * * Harrison, Mark. "The Soviet Union after 1945: Economic Recovery and Political Repression," ''Past & Present'' (2011 Supplement 6) Vol. 210 Issue suppl_6, p. 103–120. * Goldman, Marshall (1991). ''What Went Wrong With Perestroika''. New York: W. W. Norton. * Kennedy, Paul. '' The Rise and Fall of the Great Powers'' (New York: Random House, 1987). * * Moser, Nat. ''Oil and the Economy of Russia: From the Late-Tsarist to the Post-Soviet Period'' (Routledge, 2017). * Nove, Alec. ''An Economic History of the USSR, 1917–1991''. (3rd ed. 1993
online free to borrow
* Ofer, Gur. "Soviet Economic Growth: 1928-1985," ''Journal of Economic Literature'' (1987) 25#4: 1767-1833
online
* * Rutland, Robert (1985). ''The Myth of the Plan: Lessons of Soviet Planning Experience''. London: Hutchinson.


In Russian

* Kara-Murza, Sergey (2004). ''Soviet Civilization: From 1917 to the Great Victory'' (in Russian) Сергей Кара-Мурза. Советская цивилизация. От начала до Великой Победы. . * Kara-Murza, Sergey (2004). ''Soviet Civilization: From the Great Victory Till Our Time'' (in Russian). Сергей Кара-Мурза. Советская цивилизация. От Великой Победы до наших дней. .


External links

* Andre Gunder Frank
"What Went Wrong in the 'Socialist' East?"
{{Economy of Europe
Soviet Union The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nationa ...
Soviet Union The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nationa ...
Collectivism Planned Economies