Economic Decline in the USSR (Edexcel A Level History): Revision Note

Summary

• This note will examine why there was economic decline in the Soviet state

• By the late Brezhnev era, the Soviet economy was in stagnation, with slowing growth and falling productivity

• Decline was caused by structural weaknesses, poor planning, and rising military spending

• The impacts included falling living standards, reliance on the black market, and growing disillusionment

• Historians debate whether the USSR’s economic problems were fixable, or whether the system was doomed to collapse

Why did the economy decline under Brezhnev?

Structural weaknesses

• By the 1970s, the command economy model was outdated

  • Growth was based on extensive growth rather than intensive growth

  • By the 1970s, there were no longer spare resources to exploit

• The command economy discouraged initiative

  • Managers met quotas but had no incentive to improve efficiency or quality

• Emphasis remained on heavy industry, while consumer goods and services lagged behind

Stagnation in agriculture

• Despite huge investment, agriculture remained inefficient

  • Collective farms underproduced

  • Private plots continued to supply a disproportionate share of food

• Frequent poor harvests meant the USSR increasingly imported grain from the USA and Canada

Rising military spending

• The arms race with the USA diverted massive resources into defence

• By the early 1980s, estimates suggest the USSR spent 15–17% of GDP on the military

  • This compares to around 6% in the USA

• This level of spending meant less investment in housing, consumer goods, and infrastructure

Dependence on oil prices

• From the mid-1970s, the USSR became heavily reliant on oil and gas exports to earn foreign trade

• The 1973 oil crisis initially boosted Soviet revenue

  • Oil production increased from 243 million tons (1965) to 603 million tons (1980)

• Soviet oil masked severe economic issues

  • The extra money from oil meant that the USSR could continue to:

    • Import grain from the West

    • Borrow money from Western governments

    • Improve living standards in the USSR

• However, a reliance on oil made the economy vulnerable

  • When global oil prices fell in the early 1980s, Soviet income collapsed

    • This revealed the weakness of its wider economy

Attitudes of leadership

Brezhnev

• Brezhnev promoted 'developed socialism', favouring stability and resisting major reforms

  • He accepted the economy for what it was, rather than trying to improve it

Andropov

• Andropov recognised inefficiency in the economy and attempted to make small reforms

  • His reforms had a limited impact and were short-lived

Chernenko

• Returned to Brezhnev-style conservatism, making almost no reforms before his death

Impacts of the economic decline in the USSR

Falling growth

• Economic growth slowed dramatically

  • 1950s: Around 5–6% growth per year

  • 1970s: Around 2% growth

  • Early 1980s: Less than 1%

Living standards

• Despite investment, workers faced:

  • Shortages of everyday goods

  • Long queues

  • Poor-quality housing

• Citizens relied on illegal trading and bribery to obtain essentials

Dependence on imports

• The USSR increasingly bought grain and technology from abroad

  • This undermined its image as a self-sufficient superpower

Disillusionment

• Economic failure weakened faith in the Soviet system

  • It gave opponents of communism strong evidence of its flaws

Could the USSR be economically saved?

• Historians disagree over whether the USSR’s economy could have been revived with reforms, or whether its problems were so deep that collapse was inevitable

The USSR could have been saved with reform

• Some historians argue that limited reforms might have revived the economy

  • Emphasis on modernisation and decentralisation could have reversed stagnation

Key historians

"The economy was in trouble. The all-important revenues from oil declined dramatically, as prices fell from $37 a barrel in 1980 to $14 in 1986. More investment was needed in the older Soviet oil-fields, but more than half the government's expenditure was eaten up by the military. To fill the holes in its budget the government took money out of people's savings, increased vodka sales, and built up a massive deficit. People grumbled about low pay, poor living conditions, shortages of food and consumer goods. But the economy had been much worse at more unstable periods of Soviet history. The Soviet population was used to shortages, and there were no signs of mass protest. In other words, the regime could have soldiered on. There was no pressing need for radical reform. Authoritarian regimes can survive - not for ever but certainly for decades - with worsening economies. Many have done so with circumstances worse than in the Soviet Union during the 1980s. If there was a 'crisis' in the USSR, it was perceived mainly by the Soviet élites." - Orlando Figes, A People’s Tragedy (1996)

"In an attempt to spur a sluggish but viable economy the rulers damaged political and ideological pillars that brought the whole social system, including the economy, down...As usual, the most damaging element of the economic ignorance was not what the experts did not know, but what they thought they knew that was not so. The rulers, their advisors, and the educated public shared an unspoken assumption about the economy (and society) that shaped the policy proposals of that period: that anything is possible in social reforming. With the right policies, the Soviet economy can be made as dynamic as the best capitalist economies." - Michael Ellman & Vladimir Kontorovich, The Destruction of the Soviet Economic System (1998)

"The 1980s decline in Soviet oil output and in world oil prices made the pain immediate, but it was by no means a foregone conclusion that the full intractability of these profound structural weaknesses would be exposed to the world and the inhabitants of the Soviet Union... Relative to the West, the planned economy performed inadequately, but it employed nearly every person of working age, and the Soviet standard of living, though disappointing, was tolerable for most people... The Soviet Union was not in turmoil." - Stephen Kotkin, Armageddon Averted: The Soviet Collapse, 1970–2000 (2001)

The USSR’s decline was inevitable

• Other historians argue the problems were structural and could not be solved without dismantling the command economy

• The system’s focus on quotas, lack of incentives, and refusal to prioritise consumer needs made failure certain

Key historians

"It is, however, a politically significant fact that numerous Soviet economists, historians, publicists, look at the record since the revolution, observe today’s disastrous decline, and conclude that the road chosen by Lenin was fundamentally the wrong road. The gigantic scale of human losses and suffering, the sacrifices, the enthusiasm of zealots in the twenties and thirties, the terror, produced in the end a lop-sided, inefficient and unviable economic system, which could not even claim exceptionally high growth rates, once the figures were revised downwards. It has been claimed that the USSR in the eighties was as far behind the United States as was the Russian Empire in 1913. So statistical revisions have had a political role in de-legitimizing the Soviet regime and contributing to its collapse." - Alec Nove, An Economic History of the USSR (1992)