by hilzoy
Kevin Drum mentioned this article by Yegor Gaidar a few days ago, but clever me didn't read it until just now. It's really fascinating, so if any of you made the same mistake, now's your chance to undo it. He makes a really interesting argument about why the USSR collapsed. Basically, the first part goes like this:
(1) Soviet agricultural policy was a complete disaster. The Soviet population increased; its grain production did not begin to keep pace. There's an amazing graph showing grain production actually declining slightly between 1965 and 1990.
(2) As a result, the Soviets needed to import grain. To do this, they needed hard currency, which in turn meant that they needed to export something. More bad news: their products were so lousy that no one would buy them. So they had to export raw materials.
(3) Luckily, "at almost exactly the time when serious problems with the import of grain emerged, rich oil fields were discovered in the Tyumen region of Western Siberia." Moreover, after the first oil shock of the 1970s, prices were high. The problem was temporarily solved. The USSR could have recognized that this solution was, in fact, only temporary, but no such luck:
"In the 1970s and early 1980s, the Soviet leadership, however, was not intellectually prepared to heed lessons from the School of Salamanca. The shortest quotation about the intellectual capacity of the Soviet leadership came from the Politburo minutes: "Mr. Zasiadko has stopped binge drinking. Resolution: nominate Mr. Zasiadko as a minister to Ukraine.""
(Priceless.)
(4) Then it all came unglued:
"The timeline of the collapse of the Soviet Union can be traced to September 13, 1985. On this date, Sheikh Ahmed Zaki Yamani, the minister of oil of Saudi Arabia, declared that the monarchy had decided to alter its oil policy radically. The Saudis stopped protecting oil prices, and Saudi Arabia quickly regained its share in the world market. During the next six months, oil production in Saudi Arabia increased fourfold, while oil prices collapsed by approximately the same amount in real terms.As a result, the Soviet Union lost approximately $20 billion per year, money without which the country simply could not survive. The Soviet leadership was confronted with a difficult decision on how to adjust. There were three options--or a combination of three options--available to the Soviet leadership.
First, dissolve the Eastern European empire and effectively stop barter trade in oil and gas with the Socialist bloc countries, and start charging hard currency for the hydrocarbons. This choice, however, involved convincing the Soviet leadership in 1985 to negate completely the results of World War II. In reality, the leader who proposed this idea at the CPSU Central Committee meeting at that time risked losing his position as general secretary.
Second, drastically reduce Soviet food imports by $20 billion, the amount the Soviet Union lost when oil prices collapsed. But in practical terms, this option meant the introduction of food rationing at rates similar to those used during World War II. The Soviet leadership understood the consequences: the Soviet system would not survive for even one month. This idea was never seriously discussed.
Third, implement radical cuts in the military-industrial complex. With this option, however, the Soviet leadership risked serious conflict with regional and industrial elites, since a large number of Soviet cities depended solely on the military-industrial complex. This choice was also never seriously considered.
Unable to realize any of the above solutions, the Soviet leadership decided to adopt a policy of effectively disregarding the problem in hopes that it would somehow wither away. Instead of implementing actual reforms, the Soviet Union started to borrow money from abroad while its international credit rating was still strong. It borrowed heavily from 1985 to 1988, but in 1989 the Soviet economy stalled completely.
The money was suddenly gone."
The rest of the article describes the denouement. I think it's fascinating. I'd love to hear your take on the whole thing.
(Personally, I think the Politburo quote -- "Mr. Zasiadko has stopped binge drinking. Resolution: nominate Mr. Zasiadko as a minister to Ukraine." -- is worth the price of admission all by itself.)
But but but, where is St. Ronnie?
Posted by: Ugh | June 18, 2007 at 12:22 AM
Third, implement radical cuts in the military-industrial complex. With this option, however, the Soviet leadership risked serious conflict with regional and industrial elites, since a large number of Soviet cities depended solely on the military-industrial complex. This choice was also never seriously considered.
And now we too are failing to seriously consider cutting spending on our own military-industrial complex, which has eff-all to do with 'defense', and increasingly not even much to do with imperial offense.
Whistle past that graveyard, folks!
Posted by: Nell | June 18, 2007 at 12:35 AM
Nothing was more discouraging then having to see american liberals on soviet tv talking about what a great country USSR is, such wonderful socialized medicine and etc. Made us roll our eyes. And Reagan *is* a hero to many of us.
The truth is, the soviet system has never worked and the people living in the ussr knew it. Goods and services did not reach the end consumer - if you were a butcher, a store manager or in charge of warehouse or some other position where you controlled the goods - you were well of. Cause then you could sell them at the black market, or in the least make sure that your family had access to the products before someone else sold em off. My family had to wait in line for over 10 years to get a phone installed, many lived in communal apartments - a family per room. Yes, you would have a father, mother, daughter, son in 1 room. And guess what hapens when the daughter gets married? That's right, now you have a father, mother, daughter, her husband, son in that very same room. My grandparents did not have a restroom indoors until late 1960's - there was a communal restroom in the court yard (for 200 people) and for a bath you'ld go to a bathouse. And this is in a town of over a million!
We, regular soviet folk knew that the system was broken, and when Reagan butted heads with the soviet leaders we cheered (although, quietly), because he was saying what was on our minds. I will never forget my dad with his little short wave in the kitchen, tuning to the voice of america. A tough thing to do, since most of the time the frequency would be jammed. And once the Golos Ameriki came through it was like magic. And trust me, liberals cuddling the soviets was the last thing he wanted to hear coming out of that speaker.
That's, right. St. Ronnie.
Posted by: Stan LS | June 18, 2007 at 12:49 AM
Without question the decline was economic, but something else just as important was missing -- the unwillingness of communist leaders to rule as true totalitarians.
After all, Russia could have continued like North Korea today despite utter economic destitution, but Soviet leadership did not have it in them to do it just one more time like Uncle Stalin. The starkest example of this was the feeble 1992 coup, which could have easily been put down a la Tianeman Square if the Soviets had the stomach to kill several thousand people to make the point.
Now Russia is just another authoritarian regime -- just fine per the Kirkpatricks of the world.
And I second Nell's point -- we are busy imitating its decline with obscene military spending.
Posted by: dmbeaster | June 18, 2007 at 12:50 AM
Stan LS:
And trust me, liberals cuddling the soviets was the last thing he wanted to hear coming out of that speaker.
Myth making at its finest -- there were no liberals cuddling the soviets.
And what does the good Russian family listen to now? Far right hate radio? Rush Limbaugh and Bill O'Reilly telling it like it is?
Posted by: dmbeaster | June 18, 2007 at 12:57 AM
dmb: Hilzoy's Law of Large Numbers suggests there was probably at least one, and my knowledge of the USSR suggests that that one was probably played over and over.
Personally, I come (on one side) from a good Swedish Socialist family, and (on the other) from an at least partly liberal US one, and I don't know anyone who had any illusions about the USSR. But I can't imagine that not a single person, anywhere, made that mistake.
Posted by: hilzoy | June 18, 2007 at 01:08 AM
But, hilzoy, that's not the claim. The claim is that "liberal Soviet Union-cuddlers" represented some significant segment of U.S. opinion, spoke from a mass media or high political platform. Which is b.s., as dmbeaster says.
Posted by: Nell | June 18, 2007 at 01:23 AM
But but but, where is St. Ronnie?
Dispatching his Vice President to cut a sweet deal with the House of Saud, along the lines of "We'll sell you whatever planes and weapons you want, and no questions will be asked about your withdrawals at Riggs bank."
Turning a blind eye, in other words.
Posted by: Nell | June 18, 2007 at 01:30 AM
hilzoy:
Actually, you would not have to rely on the law of large nuumbers -- the soviets would fake a coddling liberal if none was readily available.
I have no doubt that just as their are Ward Churchill's around today, there have always been a few leftists enamored with the Soviet Union. Just like there are a few righties with a soft spot for Hitler or other dictators.
And although I am no fan of Reagan, without question his greatest contribution to the Cold War was strong rhetoric that stirred the hopes of Eastern Europeans and Russians. Too bad Ronnie fans have to besmirch that with false tales of liberals coddling the soviets.
Posted by: dmbeaster | June 18, 2007 at 01:32 AM
It seems to me that the oil/grain crisis described was the proximate cause, while the horrible economic system/direct failure compared to the West was the root cause. The contrast between the USSR and the West was becoming too stark, if it wasn't the oil shock it would have been something else.
As for Reagan, the arms race was yet another pressure point that made the whole thing fall apart when the shock finally came.
Posted by: Sebastian Holsclaw | June 18, 2007 at 01:57 AM
So a question for you all out there:
Does this give confirmation or disconfirmation to the Reagan arms race theory?
Obviously it points to different proximate causes, but was the arms race another "pressure point" as Seb describes it or was it insignificant?
Posted by: Ara | June 18, 2007 at 02:22 AM
They needed grain? Wasn't there some grain embargo...round about 1979...some foreign policy failure...
Posted by: Mo MacArbie | June 18, 2007 at 02:43 AM
StanLS, are/were you Russian? While you certainly don't have to, I'd be interested in hearing about any background you'd like to reveal.
Posted by: liberal japonicus | June 18, 2007 at 04:31 AM
Bad as the Soviet economy was, the Yeltsin economy under Western tutelage managed to be quite a bit worse.
Posted by: Donald Johnson | June 18, 2007 at 06:41 AM
Which is not to say the Soviet economy wasn't a disaster and didn't need to change--just that the West's golden boy and his economic advisors and cheerleaders helped make things worse.
Posted by: Donald Johnson | June 18, 2007 at 07:09 AM
But but but, where is St. Ronnie?
When demand drops, price usually follows.
Reagan decontrolled the price of domestic oil and reduced imports by 2 million barrels a day. More importantly, we started getting a lot more oil from Canada, Mexico, the Caribbean, and Great Britain rather than OPEC countries.
I’m not saying those actions were intended to pressure the Soviets, but intentional or not, this too can be traced straight to St. Ronnie.
Posted by: OCSteve | June 18, 2007 at 07:46 AM
And that's why we kiss the Saudi royals' ass to this day.
Posted by: dzman49 | June 18, 2007 at 09:55 AM
OCSteve,
I don't think the price decontrol had much, if anything, to do with it.
Reagan apparently removed a price cap. That would make prices go up, not down. That in turn would lead to more production of oil that would otherwise have been uneconomical. If some of that happened in the western hemisphere, as is likely, then we would naturally get less oil from the Middle East than from nearby, including domestic, sources.
What would drive prices down would be what Gaidar describes - a massive increase in Saudi production.
Posted by: Bernard Yomtov | June 18, 2007 at 10:06 AM
The critical pressure point provided by oil prices is one reason why I can't bring myself to unequivocally condemn past US ties to the Saudis. Being a power player and making deals with them could well have been decisive in ending the Cold War, which, despite some downsides, was a net positive for people from Warsaw to Washington to Managua, Beijing and Pnomh Penh.
The Saudis are nasty, brutish reactionaries, but occassionally there's been genuine mutual interests between them and washington that it made sense to pursue. Their main problem is't the government, its the people and their religious educational complex, which has operated as a pressure group to promote intolerance and division globally, and which was always dissatisfied at the prospect of doing business with a major non-Muslim power, insisting on a policy towards the rest of the world based on dictation and Wahhabi supremacy.
Posted by: spockamok | June 18, 2007 at 11:24 AM
And Reagan *is* a hero to many of us.
It's pretty easy to sit around and say that, for example, Mugabe is an Autocrat and a Bad Guy. It's much harder to come up with a way of improving things in Zimbabwe.
Personally, I think the role of president encompasses more than cheerleading. And it's not as if he was saying something particularly courageous for the time- hating on the Russkies was par for the course. It's not like St.Ronnie broke with the long-standing liberal traditions of Kennedy and Truman in cozying up to Ivan...
If I would praise Reagan for anything regarding his stance towards the USSR, it would be that he *wasn't* dogmatically antagonistic. He was willing move from "evil empire" to making nice with Gorby when the time was right.
More importantly, we started getting a lot more oil from Canada, Mexico, the Caribbean, and Great Britain rather than OPEC countries. I’m not saying those actions were intended to pressure the Soviets...
Not sure how us buying oil from Canada v Saudi Arabia is supposed to pressure the Soviets.
Reagan decontrolled the price of domestic oil and reduced imports by 2 million barrels a day.
Mostly, the stuff Reagan is taking credit for in that speech doesn't seem directly connected to him- the oil crisis of the late 70s led to better gas mileage (the CAFE standards were passed in the 70s as a reaction to the oil embargo, increasing gas mileage in a way Reagan wouldn't have approved of). The Saudis started producing lots of oil, which drove the price down. etc.
See here for a graph of US fuel economy- it starts rising in the 70s, either directly as a result of the embargo or indirectly via the CAFE standards law.
Posted by: Carleton Wu | June 18, 2007 at 02:19 PM
Carleton,
No graph found at "here." Please resubmit.
Posted by: moe99 | June 18, 2007 at 03:57 PM
You all realize that Gaidar is a gigantic crook who helped preside over the pillaging of the Russian economy in the name of the free market and was widely (and probably rightly) suspected of massive corruption himself, right? No matter how interesting the article, I would check and double-check everything in there.
Posted by: James | June 18, 2007 at 03:57 PM
So, who was ultimately responsible for the collapse of the USSR? Turns out it was Josef Stalin.
Posted by: Johnny Pez | June 18, 2007 at 09:12 PM
So, who was ultimately responsible for the collapse of the USSR? Turns out it was Josef Stalin.
Well, fair's fair. If he hadn't industrialised the USSR during the inter-war period (over the bodies of so many Russians), the world would be looking very different during the 1940s...
Posted by: Phoenician in a time of Romans | June 18, 2007 at 11:00 PM
#1 Communism (as practice in the hierarchical soviet fashion) is an economic and political failure. People under this form of communism do not show much iniative as people's primary motivation is the profit motive. No profit, no motive.
#2 Central planning stifles creativity from the standpoint of businesses, services and science. Central planners cannot perform the same decision-making efficiency as can millions of entrepeneurs.
#3 The USSR spent way too much money on its military.
#4 The USSR's economy stopped growing by the 1980's.
Posted by: politics forum | June 19, 2007 at 01:12 PM
#1 Communism (as practice in the hierarchical soviet fashion) is an economic and political failure. People under this form of communism do not show much iniative as people's primary motivation is the profit motive. No profit, no motive.
People's primary motivation is their sense of identity. So fanatic muslims sometimes do things that it would be hard to get people to do for any amount of profit.
Secondary motivation is a sense of excitement. Sometimes profit can do that, for example during gambling. Other times not.
Tertiary motivation is security. Money can sometimes provide a sense of security.
The soviets neither generated nor tolerated a whole lot of initiative. We don't do that much initiative either, not nearly as much as we used to.
#2 Central planning stifles creativity from the standpoint of businesses, services and science. Central planners cannot perform the same decision-making efficiency as can millions of entrepeneurs.
Agreed. While uncoordinated entrepreneurs are often extremely inefficient, they do at least tend to follow up on their wins. Our very large corporations are giving us the same problems the soviets had, without even the accountability their bureaucracies theoretically had to higher authority.
#3 The USSR spent way too much money on its military.
Agreed. We are spending considerably more, far more than we can afford under current circumstances.
#4 The USSR's economy stopped growing by the 1980's.
Our economy is officially still growing. Does it seem to you like it is?
It bothers me that we don't seem to have learned from their mistakes. For awhile it looked the other way round, they didn't learn from our mistakes. We had vietnam, they had afghanistan. We had Three Mile Island, they had Chernobyl. But now on a large scale we're doing the things that made them fall apart.
Posted by: J Thomas | June 19, 2007 at 01:58 PM
Nell,
". The claim is that "liberal Soviet Union-cuddlers" represented some significant segment of U.S. opinion, spoke from a mass media or high political platform. Which is b.s., as dmbeaster says."
BS or not, I am sure there's a healthy market for Michael Moore's cuban cuddly "Sicko". Ofcourse if he wanted to make a real documentary he would've equiped some ordinary cuban citizens with hidden cameras and see what kind of medical treatment they would've gotten...
liberal j,
"StanLS, are/were you Russian? "
I am a russian Jew. My family came to US in 1989 as refugees.
Posted by: Stan LS | June 21, 2007 at 11:45 PM
Thanks Stan, there are a lot of questions I would like to ask, but I don't want to put you on the spot. Hope you will feel free to relate your experiences when the mood strikes.
Posted by: liberal japonicus | June 22, 2007 at 02:00 AM
Ask away.
Posted by: Stan LS | June 23, 2007 at 09:27 AM
The problem facing the Soviet Union was more than a mismanagement of resources like oil. Under the Soviet Union, the quality of their products was completely ignored. Soviet factories had no regulations. They destroyed the environment and caused a great deal of damage. Soviet cars had no regulation on safety or reliability. It was simply a perfect example of neglect.
All the Soviet leadership was concerned about was quantity; a trait that had its origins in Stalin's days. Even by the 1980s, the Soviet Union was still a quantity-driven economy, refusing to change it's economic plan. Its not to say that quantity-driven economies are completely bad. In the early days of the USSR, quantity was in fact the driving factor because the economy was small and underdeveloped.
For example, in 1920, less than 1/10 of all soviet farms had a tractor so logically, economists would say making 10 tractors was the solution, regardless of the quality. Having a tractor, even a bad one, was better than not having one. 50 years later; however, the situation was different. Making more tractors was not the solution to yield higher crop outputs. You needed better quality products. Thus, we discover the fatal flaw of the Soviet system; its refusal to change. Think about it; why are nations like Germany, Japan, or the UK so economically powerful even though the control almost no natural resources? Any economy that simply exploits its natural resources is doomed to stagnate and fail. Once the oil runs out in 50 years, the Middle East is going to be as poor as Africa, with the exception of a few countries like the UAE which has taken steps to shift their economy away from solely oil and towards tourism and human services.
If there is any lesson to be learned from the collapse of the USSR, its that those who choose to remain close-minded and blind are doomed to fall into the "dustbin of history" as Leon Trotsky would say.
Posted by: Brendon | July 21, 2007 at 03:21 AM