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03 Apr 2019, 01:42
Today many people believe that the economy of the USSR stagnated during the seventies and into the eighties. But what is stagnation? Economic Stagnation means a continual yet very slow rate of economic growth. An economy is stagnated when its rate of growth has been below 1% for a number of years (let’s say 5). This was not the case in the USSR, and I have 3 short things to say about this myth:
First, that in said era the USSR had an average growth of 3% per-year, which by itself shows there was no stagnation. Compared to previous years, there was a DECELERATION, something VERY different to stagnation.
Second, that said rate of growth is normal and typical in mature economies. For example, the USA has had that rate of growth since decades, and it is illogically to conclude that the North American economy has been stagnated during most of its history. At the time here discussed, it grew at that 3%, like the USSR. According to some sources, like the CIA, the USSR still had a better rate of growth. No economy can sustain extensive growth (that is, massive input of resources to achieve a massive output of products) eternally. At some point, resources will begin to deplete, and so an intensive growth (that is, the efficient use of available inputs, to maximize outputs) must be achieved. This is something natural: ALL economies, whether capitalist or not, must learn to achieve a stable intensive growth. This phenomenon is much more visibly in socialist economies because unlike capitalist countries, socialist ones tend to embark on a period of rapid industrialization, to achieve an ACCELERATED rate of growth which far surpasses that of capitalist ones. The USSR had achieved (in economic terms) in 10 years what capitalist economies had achieved only after 75 years, and with massive help of foreign capital. But by the seventies it had exhausted its extensive growth. It no longer possessed the readily, close and in-hand resources which Stalin had used to achieve Socialism. Those resources were now far away, it took more time and more money to get to them and extract them. Those things become more expensive (in both money and resources) and slow. Other factors which affected the rate of Growth were the massive military spending because of the Cold War, and the lack of modernization in enterprises and planning organs. That is, the lack of efficiency in intensive production.
Third, that in the seventies, the deceleration phenomenon was not only experienced by the USSR, but by all advanced economies, and in fact it was much worse in the Western countries, in which for example France, Italy, the United Kingdom and the Federal Republic of Germany experienced an economic deceleration worse than the soviet one. In the US, a period known as “stagflation” (Stagnation + Inflation) started. Inflation was non-existent in the USSR. However, no one speaks about “the era of stagnation” in the western countries.
There was no “Era of Stagnation” (at least in the economic sense of the expression) in the Soviet Union. There was no “Pre-Crisis situation” in the USSR. There were problems, obviously, the most serious being that the “Vanguard of the proletariat” was no longer a vanguard, since it contained MANY non-socialist and opportunists within its ranks. But none problem was fatal to the USSR existence. The best things to do would have been to drastically decrease the military expenditure, to use other means to secure its borders, modernize the economy (somehow) and the most important one: a very well carried purge of the CPSU.
Sources:
“Principales problemas en la economía soviética y su incidencia en el final de la URSS”, book by Julio Parra.
“Factores económicos en la caída del Socialismo Soviético”, work by Paul Cockshott.
“¿Qué le ocurrió a la Unión Soviética?”, work by Sergey Kara Murza.
First, that in said era the USSR had an average growth of 3% per-year, which by itself shows there was no stagnation. Compared to previous years, there was a DECELERATION, something VERY different to stagnation.
Second, that said rate of growth is normal and typical in mature economies. For example, the USA has had that rate of growth since decades, and it is illogically to conclude that the North American economy has been stagnated during most of its history. At the time here discussed, it grew at that 3%, like the USSR. According to some sources, like the CIA, the USSR still had a better rate of growth. No economy can sustain extensive growth (that is, massive input of resources to achieve a massive output of products) eternally. At some point, resources will begin to deplete, and so an intensive growth (that is, the efficient use of available inputs, to maximize outputs) must be achieved. This is something natural: ALL economies, whether capitalist or not, must learn to achieve a stable intensive growth. This phenomenon is much more visibly in socialist economies because unlike capitalist countries, socialist ones tend to embark on a period of rapid industrialization, to achieve an ACCELERATED rate of growth which far surpasses that of capitalist ones. The USSR had achieved (in economic terms) in 10 years what capitalist economies had achieved only after 75 years, and with massive help of foreign capital. But by the seventies it had exhausted its extensive growth. It no longer possessed the readily, close and in-hand resources which Stalin had used to achieve Socialism. Those resources were now far away, it took more time and more money to get to them and extract them. Those things become more expensive (in both money and resources) and slow. Other factors which affected the rate of Growth were the massive military spending because of the Cold War, and the lack of modernization in enterprises and planning organs. That is, the lack of efficiency in intensive production.
Third, that in the seventies, the deceleration phenomenon was not only experienced by the USSR, but by all advanced economies, and in fact it was much worse in the Western countries, in which for example France, Italy, the United Kingdom and the Federal Republic of Germany experienced an economic deceleration worse than the soviet one. In the US, a period known as “stagflation” (Stagnation + Inflation) started. Inflation was non-existent in the USSR. However, no one speaks about “the era of stagnation” in the western countries.
There was no “Era of Stagnation” (at least in the economic sense of the expression) in the Soviet Union. There was no “Pre-Crisis situation” in the USSR. There were problems, obviously, the most serious being that the “Vanguard of the proletariat” was no longer a vanguard, since it contained MANY non-socialist and opportunists within its ranks. But none problem was fatal to the USSR existence. The best things to do would have been to drastically decrease the military expenditure, to use other means to secure its borders, modernize the economy (somehow) and the most important one: a very well carried purge of the CPSU.
Sources:
“Principales problemas en la economía soviética y su incidencia en el final de la URSS”, book by Julio Parra.
“Factores económicos en la caída del Socialismo Soviético”, work by Paul Cockshott.
“¿Qué le ocurrió a la Unión Soviética?”, work by Sergey Kara Murza.
03 Apr 2019, 10:28
I think just about everyone considers the era after the 1973 oil crisis as one of economic decline in the West, as well as many developing countries.
The stagnation is mostly called that because of political/cultural factors, as nothing really changed in that - politics were the same every year, very few cultural products were allowed past censors, or were so watered down by them that they lost their substance. It's true that many people in the USSR achieved a quality of life comparable to that of Western and Northern Europe at the time, whereas before they didn't have shit. But economically, the state focused on megaprojects as an engine for economic growth, which ended up being costly multi-decade boondoggles.
These projects were also focused mostly on natural resource extraction, while in areas like computers (and really, most consumer goods as well), the Soviet Union pursued a strategy of developing analogues of Western products, and for that reason failed, as the Americans were developing new integrated circuits while the Soviets were still copying the old ones. And not only that, but putting their best minds to copying instead of developing something new, and as a result falling farther and farther behind, as development of electronics accelerated.
In terms of military spending, actual estimates differ widely because dual use technologies poorly implemented in the civilian sphere are often counted as a purely military pursuit. However, from what I understand, it was actually manageable:
Another problem that is often left out is that the sophistication of the Soviet economy was such that a centralized planning model could no longer handle it, even in a simplified model as implemented under the Kosygin/Liberman reform. The problem was that there were so many competing stakeholders and interests that their competition for administrative resource hurt the economy as a whole. For example, the Moskvitch plant was in constant competition with Lada, but this meant that Lada received favorable treatment in investments and production targets while Moskvitch was forced to produce more cars at the expense of quality and had its model lineups be delayed and cancelled as they ran into bureaucracy at the ministry of automobile industry. Lada itself fell victim to this as in the 80s, the state forced it to spend loads of its own money and resources building an R&D center for cars in general even though there was already a government one near Moscow. There was basically no mechanism to deal with these issues.
The economic model in general also favored capital reinvestment for the sake of capital reinvestment because of what was essentially a socialist overproduction crisis in the extraction industries. This meant that the best factories were those that spent the most money and it didn't matter if this meant higher production efficiency because that was not the goal. This is also what led to product deficits, as more money was spent (read: given to people for their work) but this didn't lead to higher output of consumer goods.
The structural crisis in agriculture is obviously another problem, but one that predates Brezhnev.
The stagnation is mostly called that because of political/cultural factors, as nothing really changed in that - politics were the same every year, very few cultural products were allowed past censors, or were so watered down by them that they lost their substance. It's true that many people in the USSR achieved a quality of life comparable to that of Western and Northern Europe at the time, whereas before they didn't have shit. But economically, the state focused on megaprojects as an engine for economic growth, which ended up being costly multi-decade boondoggles.
These projects were also focused mostly on natural resource extraction, while in areas like computers (and really, most consumer goods as well), the Soviet Union pursued a strategy of developing analogues of Western products, and for that reason failed, as the Americans were developing new integrated circuits while the Soviets were still copying the old ones. And not only that, but putting their best minds to copying instead of developing something new, and as a result falling farther and farther behind, as development of electronics accelerated.
In terms of military spending, actual estimates differ widely because dual use technologies poorly implemented in the civilian sphere are often counted as a purely military pursuit. However, from what I understand, it was actually manageable:
Shlykov wrote:Gosplan's official data, for example, show that in the late 1980s, the defense industry employed 9.5 mln people (including 6.5 mln to 7 mln in the Russian Federation) of the total 130 mln workforce, consuming 20% of sheet steel, 9.3% of rolled steel and 23.6% of rolled aluminum products, while the complex's fixed productive capital was 6.4% of the Soviet aggregate.
Another problem that is often left out is that the sophistication of the Soviet economy was such that a centralized planning model could no longer handle it, even in a simplified model as implemented under the Kosygin/Liberman reform. The problem was that there were so many competing stakeholders and interests that their competition for administrative resource hurt the economy as a whole. For example, the Moskvitch plant was in constant competition with Lada, but this meant that Lada received favorable treatment in investments and production targets while Moskvitch was forced to produce more cars at the expense of quality and had its model lineups be delayed and cancelled as they ran into bureaucracy at the ministry of automobile industry. Lada itself fell victim to this as in the 80s, the state forced it to spend loads of its own money and resources building an R&D center for cars in general even though there was already a government one near Moscow. There was basically no mechanism to deal with these issues.
The economic model in general also favored capital reinvestment for the sake of capital reinvestment because of what was essentially a socialist overproduction crisis in the extraction industries. This meant that the best factories were those that spent the most money and it didn't matter if this meant higher production efficiency because that was not the goal. This is also what led to product deficits, as more money was spent (read: given to people for their work) but this didn't lead to higher output of consumer goods.
The structural crisis in agriculture is obviously another problem, but one that predates Brezhnev.