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Results of Economic Reforms

"Gorbachev Factor"

By the early 1990s, as a result of Gorbachevís self-styled economic reforms, the Soviet economy was in worse shape than in 1985. Freed from some of the coercive pressures of the past, the system of central planning eroded without adequate free-market mechanisms to replace it. In an environment of universal shortages and general confusion, state enterprises used their newly found freedom to reduce planned output, to drop low-priced products from production, and to raise prices under the guise of new products. All this added to inflation and exacerbated the perennial shortage of consumer goods. Empty shelves, longer lines, and increased distribution through special channels and on the black market became widespread. 

 

Because there was no longer effective control from Moscow at the republic and local levels, rising nationalism, ethnic strife, and regionalism fragmented the economy into dozens of mini-economies. Many republics within the Soviet Union sought independence, others sovereignty, and they all pursued policies of economic self-isolation. Barter was widespread. Goods and food rationing systems had to be set up: Ukraine introduced coupons, and Moscow issued ration cards. By 1990 the Soviet economy had slid into near-paralysis, and this condition foreshadowed the fall from power of the Soviet Communist Party and the breakup of the Soviet Union itself into a group of independent republics in 1991.

Gorbachevís economic strategies were largely to blame for the disappointing record of perestroika. His intention was to switch to intensive economic development by adjusting the traditional pillars of the Soviet economic system. After an initial flush of enthusiasm, the task of accelerating economic growth by adjusting the centralized planning system proved to be far more difficult than anticipated. Reform measures were introduced without investigating the roots of Soviet economic difficulties and the reasons why similar reform attempts in the past had failed. Decades of falsified statistics and creative accounting to simulate nonexistent successes had created a situation where even the top Soviet leaders themselves did not have a true picture of the condition of the national economy and the severity of its crisis.

Gorbachev acted out of a firm conviction that the ideological and economic foundations of the Soviet system were fundamentally sound. It would be naive to expect a convinced Communist to advocate liberal economic policies, such as breaking the monopoly of state ownership, withdrawing state subsidies from unprofitable enterprises, allowing genuine market competition, and giving land to peasants in their private ownership. Moreover, radical proposals of this nature would have never received the approval of his Politburo colleagues: a Soviet leader who espoused such views would have been regarded by them as worse than the dissidents and would have risked being locked up in a psychiatric hospital.

Gorbachevís attempt to renovate socialism was limited to tinkering with the old system that only deepened its general crisis. By the end, perestroika had reached the stage of a total economic breakdown, with deficits and social upheavals. The goal of creating a socialist regulated market economy, able to satisfy consumers and close the technological gap with the West, was not realized. However, the abysmal economic record of perestroika did achieve one thing: it appeared to demonstrate the impossibility of rejuvenating the Soviet model of socialism, pushing it to its final collapse.

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The Economy in Crisis

 

Soviet Russia

Understanding the Soviet Period
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