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There is no agreement among analysts on when the Soviet economic system showed the first signs of stagnation and decay. Some believe that the origins of its general crisis go as far back as the mid-1950s; others think that it entered the crisis stage in the late 1970s, still others, in the 1980s. One thing is certain: in the final two decades of the Soviet Unionís existence, ďstate socialismĒ lost its earlier dynamism and vitality and became mired in a drawn-out stagnation. 

 

The protracted and creeping nature of the Soviet economic crisis may be explained by the countryís huge dimensions: its abundant natural resources could be thrown indefinitely into the furnace of the wasteful command economy to keep it going. Moreover, there were enough resources to enable the state to provide a system of social guarantees, including full employment, housing provision, free health care and education, and old-age pensions. The system of social protection, in combination with police control and ideological indoctrination, helped the regime to forestall for some time any serious outbursts of popular discontent.

However, when the economy showed the first symptoms of decay, the Soviet system began to lose the very rationale it was based on. Economic growth, as the necessary condition for the creation of the material base of the future Communist society, was critical for justifying the system. As long as the economy delivered high growth rates, it commanded loyalty. But the declining economic performance corroded peoplesí belief in the ability of the system to create the base for a society of material plenty. The inability to reverse this decline ultimately destroyed the systemís legitimacy.

The Stalinist economic policies favored extensive growth, that is, growth by increasing inputs of labor, raw materials, and investment capital into building ever more factories and plants. With a large pool of workers, seemingly endless supplies of oil, gas, coal and other raw materials, ample land for cultivation, and capital squeezed from the rural sector through collectivization, Soviet planners during the 1930s and 1940s treated inputs as virtually inexhaustible. However, in the late 1950s and 1960s the USSR no longer enjoyed excess labor, land, or capital resources waiting to be exploited. New gains in production had to be achieved through intensive growth, that is, by the more efficient use of existing resources. Economic growth now depended on increases in labor productivity, automation, mechanization, and the application of new technologies.

All this put pressures on Khrushchevís and consecutive Soviet governments to shift away from the Stalinist model of extensive growth. After Stalinís death and until the USSRís collapse the Soviet leadership for over thirty years was engaged in an almost continuous process of reforming the Stalinist system of socialist central planning. The objective of the reform programs of all Soviet leaders from Khrushchev to Gorbachev was to make the economy more efficient and receptive to technological innovation and more responsive to consumer wants, while retaining its socialist character. All the reform programs moved in the direction of administrative decentralization. The reforms made by Khrushchev and Brezhnev came to naught, because they left the essential features of the Stalinist economic system in place. Only under Gorbachev did the reforms make some timid steps toward privatization and marketization of the economy.

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The Economy in Crisis

 

Soviet Russia

Understanding the Soviet Period
Russian Political Culture
Soviet Ideology
The Soviet System
Soviet Nationalities
The Economic Structure
The Socialist Experiment
"Great Leap" to Socialism
Stalinism
The USSR in World War II
Stalin's Legacy
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Brezhnev's Stagnation
The Economy in Crisis
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The USSR's Collapse

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