Economic Collapse of the Communist Soviet Empire

The Soviet Union (1922-1991) emerged an economic and political giant after the bloodstained Russian Revolution of 1917 under the aegis of Lenin. After the World War II (1939-46), it became a superpower in the bipolar world. During the Cold War (1945-1991) era it was strong enough in economic and military might that it has eyeball to eyeball contact with the Uncle Sam and its western allies. However, in 1980s inherent weaknesses in the communist economy of the union surfaced that were exploited by the capitalist countries. Arms race and culture of war overburdened the Soviet economy. The economic loopholes were further deteriorated by the international political scenario that divided the world into capitalist and communist blocs. The communist states signed the Warsaw Pact in 1955 that was counterpart of the Nato(1949). The flawed economic policies and the Cold War under centrally controlled administrative system have hollowed foundations of the USSR. In 1988, the budgetary deficit was 120 billion Rubles that was one fourth of the entire government budget. Chernobyl Atomic power plant explosion and 10 years war in Afghanistan (1979-89) fatally crippled financial system of the Soviet Union. After defeat in the Afghan War, the Soviet economy became so feeble that it could not sustain the grandeur of the monumental empire that led to its crack in 1991. The disintegration of the Soviet Union resulted in liberation of fifteen states from its communist fold.

The communist ideology was the foundation on which the communist empire was erected. The USSR was not theoretically prepared for war because the founders and proponents of the communism warned about grave impacts of war on the communist economic system. Karl Marx said that war is the ultimate example of unproductive economic activity and called it "the direct equivalent of a nation throwing a part of its capital into water." Fredrick Engel wrote in Anti-Dhuring in 1877, "Militarism dominates and is swallowing Europe. But this militarism also bears within itself the seed of its own destruction. Competition among the individual states forces them, on the one hand, to spend more money each year on the army and navy, artillery, etc., thus more and more hastening their financial collapse..."

Lenin also warned about terrible consequences of 'war communism'. He stressed on the upscale significance of science and technology in the emerging global scenario and urged upon his countrymen to drift away from war and move towards socialism. Lenin said in 1921 while setting new economic policy, "the tax in kind is one of the forms of transition from that peculiar war communism which was forced on us by extreme want, ruin and war to regular socialist exchange of products." Contrary to vision of the communist torchbearers, the Union of Soviet Socialist Republics spent heavily on research and development relevant to military technology. Moreover, the war-monger leadership time and again resorted to military muscle with an ambition to establish its dominancy in the world. These hegemonic designs and aggressive activities over-burdened the Soviet economy that was chief reason that led to fall of the communist powerhouse. Moreover, Gorbachev liberal policies resulted in gradual grinding down of communist ideology that eroded basis of the union.

Lloyd Dhumas in his book, 'The Overburdened Economy' published in 1986 illustrated the fundamental weaknesses in economic policies of the Soviet Union. He was of the view that military productivity is worse than unproductively. Due to massive diversion of resources in military hardware production, relatively bare resources were left to be channelized for consumer goods and services that worsen the standard of living of the people. Social and health indicators of the people are significant factors that mirror economic policies and financial strength of the country. In this context, the economic policies of the USSR were extremely imbalanced because military sector was continuously swallowing social sector and deteriorating living condition of the rank and file. After eruption of World War I (1914-18), the 7th All-Russia Conference of the Bolshevik Party, under Lenin's headship, stated that the war "has already led to the mass destruction material values, to exhaustion of productive forces, and to such a growth in the war industry that it is impossible to produce even the absolutely necessary minimum of consumer goods and means of production."

Initial bang in the economy of the Soviet was marvelous that surprised the whole world and was really haunting capitalist economies. Allama Iqbal said, "gia daor sarmaya dari gia; tamasha dikhha kar madari gia."(The era of capitalism has gone and joker has departed after end of his show).Soviet economist Otto Latsis labeled, in his article published in the world Marxist Review, the Soviet war time model a 'miracle'. He jotted down, "The glitter of that miracle blinded us for decades, and the command administrative methods of the extensively developing economy took firm root in the country." With the passage of time the economic picture worsened by surfacing of inbuilt weakness in the communist economic system which were further exploited and worsened by global political scenario and its deep psychological impact on the teeming millions. According to Otto Latsis, "the gloomy background of the worsening market situation...has a depressing effect on people."

No country can make any headway in the welter of technological explosion without funneling sufficient resources in this exceedingly vital field. Although, the Soviet Union invested heavily in technology but it was only the military equipment that was the center of attention. The massive spending to produce military hardware left little resources that could be used for productive expertise and professional skills that were mandatory for welfare of the public and progress of the nation with gigantic strides. Moscow adopted secrecy in its military expenditures. The military technology spending figures that unveiled bear out luxurious spending for war related machinery. According to Ednan Agaev "the Moscow spent 85-90% of all scientific researches in military sector". According to another report 40 % of the entire economy was used for Research and Development organizations.

During the 20th century scientific arena was the main playing field to assert oneself in the power-packed international scenario. However, despite its capability to compete the capitalist states in this significant field, the USSR channelized little resources for scientific advancement. Therefore, scientific products and instruments were of substandard value. The Soviet's scientific knowledge and products could not compete the fabulous scientific understanding and elevated quality products of the United States and western capitalist economies. Due to inner secrecy, suspiciousness and outer political enmity, the Soviet Union was at competitive disadvantage from its rivals. Therefore, it lagged behind in this significant field that was essential to be at par with the adversarial military dinosaurs.

No country can make any significant steps forward without active involvement of the public. Public trust in the system of governance and faith in the regime in power is essential to ensure public participation in nation building. The poet of the East, Allama Muhammad Iqbal rightly said, "Afrad ke hathon mein hai aqwam ki taqdeer :Har fard hai milltat ke muqadar ka sitara"(The destiny of a nation is in the hands of the public and every individual is the star of its fate). Development of social sector is indispensable to uplift standard of living of the people to win their hearts and minds. The disgruntled people that are averse to system of governance cannot play any noteworthy role in strengthening national edifice. The USSR neglected this fundamental sector while progressing at rapid pace in war machinery production. As there were massive channelization of funds for military hardware; therefore, little funds were available for development of social sector to ensure provision of basic necessities of life. Reportedly, the Soviet defense industry formed 6.4% of the overall industrial assets while little resources were spent in education and health sector to uplift the social status of the teeming millions. Thus with advancement in military technology, the social sector continuously cried off.

The civil and military bureaucracy can play considerable role in national development and vice versa. The Soviet Union was dependent upon military and bureaucratic machinery for its coercive political and economic policies to accomplish its set goals. It was bureaucracy that had to look after the economic field and industrial development but it resorted to inefficient practices. The proper feedback was not provided to the top hierarchy by the official machinery that could mend its planning course. The official hierarchy used to declare fulfillment of targets and quotas that resulted in poor feedback to the top managers. Everyone was following the policy of 'mind one's own business' due to mysterious secrecy and suspicion. Due to continuously treading on the way of fiddling with figures and misrepresentation of demand and supply, the bureaucracy destroyed the financial framework of the Soviet Union. A few people provide real input or criticism due to authoritarian political climate. Shortfall or overproductions were not properly informed to sitting at apex of planning tree. There was exchange of raw materials between industries on barter system basis without information of the superior planning authorities. Sometime, there was underproduction while at other times there was overproduction. The results of this paranoid economy were underproduction leading to scarcity or superfluous production resulting in wastage of products. This misrepresentation of grim trade and industrial situation did not provide opportunity to the top chain of command to mend fiscal ways to stall the down-sliding economy.

The world community is interdependent for economic welfare. Economy is the chief focus of globalization. Therefore no country can stay alive in isolation in this global village. The USA integrated itself in the global market. It obtained concessions from Japan and the western countries by convincing them that it is footing the bill of the Cold War that is overburdening its economy. Moreover, the USSR also confronted supply problems to communist republics. The Soviet Union was building economies of the member states of the communist bloc at the cost of its own economy that resulted in drainage of its own resources and emasculation of the national economy. According a report by RAND Corporation, the USSR was losing at $30-50 billion per year.

The United States and the western countries were sparing no effort to contain the mushrooming communism. The western media was engaged in ceaseless propaganda against the communist empire. Korean War (1950-53), Vietnam War (1959-72), etc, resulted between the devotees of communism and capitalism. Both the superpowers provided full support to their ideological adherents. The communist republics were continuously sucking resources of the union while the USA had western economic giants at its beck and call for financial support. Such economic succor was not available to the Soviet Union that destabilized its economy.

The republics in the communist bloc were perpetually drifting towards strong sense of nationalism. The nationalism was the very base on which two horrible world wars were fought. Nationalism was casting its shadow on the communist republics that sown there seeds of secessionism from the Soviet Union. Thus, nationalism within the republics in the communist bloc and opposition by capitalist states left little room for communism and its economy to flourish. Since dissolution of the union in 1991, all 15 former soviet republics dismantled their communist system of economic governance.

According to Brezhnev doctrine, Red forces could invade any member state to keep the union intact. Although Satellite states were members of the communist empire but they were averse to interference in their internal affairs by the Red forces, e.g., the upsurges in Hungary in 1956 and Czechoslovakia in 1968 were crushed by force. Such suppression of genuine concerns only flared flames of hatred and aggravated the already simmering nationalist sentiments.

One party system was an authoritarian type of political system in which there was limited scope for criticism. The repressive policies of the communist regime developed resentment in the republics in the Marxist bloc. The democratic countries also exploited the dictatorship of the Soviet regime. Thus, crown of the USSR razed down that was centrally administrating the socialist system to achieve its political and economic goals.

Trust is the very foundation on which the human whole society is based. This very base was very fragile in the communist system of governance. In political arena, there was an atmosphere of mistrust and distrust. Party officials were killed for trivial gains that resulted in a sense of fear among the party members. The services of the secret agency KGB were used to suppress any discordant voice. Economy cannot flourish in such apprehensive political ambiance because for sound policies to thrive political certainty and mutual confidence are mandatory elements. The USSR adopted secrecy in its military, political and economic fields that permeated from crown to the foot in the country.

Communist ideology is based on theory of Karl Marx given in in the Critique of the Gotha Programme as "a society in which each person should contribute according to their ability and receive according to their need." There is an inherent weakness in communism because it gives birth to parasitic inclinations that are contagious. How can a person striving with full effort to make both ends meet be equal to a person who is keeping the wolf from the door at state expenses without making any effort? This system denies the very fundamental concept of human nature that derives satisfaction from effort and reward. The USSR economy was based on state ownership of property. Due to state possession of property, there were negligible or no incentives for working efficiently to expand ones business or property. This generated freeloading tendency and parasitical propensity that proved a burden on the union and ultimately pushed it towards demise.

There were inadequate incentives and rewards to attract and motivate workers that were essential to ensure their deep engagement to increase productivity. There were a few industries for consumer production or export. Labor in consumer goods manufacture was contributing in output while labor in war technology production was mere wastage of human resource and was counterproductive. The unemployed and unproductive people were also burden on the state because they were consuming state resources without any contribution in yield. J. S. Young, aptly said, "The Soviet economy became characterized by shoddy workmanship, poor production levels and a complete inability to compete in the world market."

The western media propagated rumors concerning gross violation of human rights and oppressive policies of the communist regime. This propaganda projected a negative image of the empire in the international community. Many states considered the mushrooming Soviet Union a monster rather than a liberator. The objective of these conspiracy theories was to demoralize the followers of communism, which they achieved to a reasonable extent.

The globalized world is suitable for competitive market economy rather than a monopolistic and isolationist economy. Competition is also essential to raise quality of the products. The monopolist economy is based on exploitation because in this system the consumers are left with no choice while making purchases. Therefore, the monopolists exploit the consumers. In Soviet Union, the monopoly was of the government. There was no competition from any other corner. Therefore, the consumer products were of extremely low quality. This monopolistic nature of economy proved disastrous for the union.

The economic activities of the USSR were organized through Gosplan(the State Planning Commission),Gosbank(the State Bank) and Gosnab(the state commission for materials and equipment supply). From 1928 onward, there was a series of five years plans with brief attempt to seven years plans. Group A production of goods was more focused which were of capital nature. After 1953 of Stalin era, group B goods production was also focused that were consumer related.

Although, the Soviet economy was self-sufficient but it traded much less in comparison of its monetary might. Fuels, metals and timber were chief exports while machinery, consumer goods and grains were main imports. The banking system of the Soviet Union was well centralized. Exchange rate continuously reduced from its official volume.

Five years plans were drafted under Stalin's auspices. It was a complex system of planning. The CPSU Party approved targets for next five years and politburo set guidelines for planning. Gosplan headed the government planning apparatus which gathered data on plan fulfillment. GOELRO Plan 1920-1931 was a network of 30 regional power plants. These plants were prototype of Soviet Five year plans. Previously it was sector based planning while Khrushchev started regional planning in era of 1950s.

The Soviet economy faced many crests and troughs in economic evolution. From 1928-1991 the economy was designated on the basis of five years plans. The USSR mobilized its mineral resources like oil, gas, coal, manganese, gold, iron, etc, that helped it in its economic strength. Soviet Union faced famine in 1932-33 that cast its slur on the economy. In 1961 Ruble was introduced that was at par with Pound Sterling. The 1971 was the zenith of the Soviet economy. Initially, Soviet economy flourished so rapidly that it became one of the top producers of capital goods, heavy industrial manufactured goods and armaments. However, the managers at the head did not pay proper attention in production of consumer goods and services.

Joseph Stalin (1929-53) developed a central governing body that controlled economy. Initially, Stalin's policies resulted in economic boom when stock markets of the West were perpetually plummeting. But gradually there was continuous economic sinking. Even economic measures like Khrushev's 1957 Sovnarkhoz reforms, the Brezhnez-Kosygin 1965 reforms, Industrial reorganization in 1973,1973 Decree, etc, failed to hamper the down sliding economy of the Soviet empire.

Efficient cost of production, management of raw materials, quality control of products and establishment of infrastructure are mandatory for economic progress that were missing in Soviet's administration of economy. However, the Soviet Union did not pay appropriate heed towards them. In 1980s, Mikhail Gorbachev and his advisors introduced economic reforms that at least prevented complete collapse of economy of the communist empire. Before, his rising to the pagoda of authority, there were economic strangulations without proper reformation. Prisoners were used for unpaid labors. There was massive unemployment and unpaid labor speaking volumes of ineptitude of the communist way of governance to deliver.

Development in the field of agriculture is essential for any economy to feed its population. Despite large workforce, extensive agricultural machinery and vast land tracts, there were fewer yields in the field of agriculture that could not meet even national requirements. Harsh climate and poor worker productivity were chief factors for agricultural backwardness. There was lack of infrastructure and transport facilities that are essential to carry agricultural produce to market. Collective farms (kolkhozes) and state farms (sovkhosez) were used for agricultural production but yield was much low. The regime in power gave little attention to agricultural field in its five-year plans and did not adopt a sound agricultural policy. Due to channelization of resources in 1976-80 five years plan to agriculture, the Soviet Union became a leading cereal producing country. Although, the farmers cultivated rural land but they have no property rights. Therefore, there were fewer incentives for them to work efficiently to boost productivity.

In a nutshell, the Soviet Union was forced to fully engage in arms race, massive war technology production and manufacture of capital goods. Although, the capitalist countries also followed the course of producing weapons but their open market system continued to flourish. They even harvested fruits of arms race. Lenin inked down in his article, 'Armaments and Capitalism', "we find that admirals and prominent statesmen of both parties, Conservative and Liberal, are shareholders and directors of shipyards, and of gunpowder, dynamite, ordnance and other factories. A shower of gold is pouring straight into the pockets of bourgeois politicians, who have got together in an exclusive international gang engaged in instigating an armaments race among the peoples and fleecing these trustful, stupid, dull and submissive peoples like sheep."

In order to keep a balance of power with the archrival America, the Soviet Union spent huge amount of funds for military machinery although its economy was almost half than its adversary. Initially, the Soviet Union made progress rapidly but it could not sustain the pace of the progress due to inherent weaknesses in its economy. Its massive use of funds for military technology consumed major chunk of resources and left little resources for productive social sectors that exposed its economic weaknesses and ultimately led to collapsing of the empire. Moreover, repressive policies of the regime to crush opposition did not provide an ambiance for proper analysis that is mandatory for rectification of any flaws in the field of economy. These sectors were on the low priority list of the regime. There is also no denying the fact that America and its western allies spared no effort in ensuring falling down of the regime due to ideological clash. The overambitious regime's ambition to gain access to warm waters of Arabian Sea further pushed the union towards the Afghan war that proved last nail in the coffin of collapsing communist empire. Thus the overburdened and imbalanced economy of the USSR collapsed under its own weight and resulted in shattering of the Soviet Union in 1991. The Capitalist countries aptly brag that they "spent the Soviet Union into the grave" by means of the arms race.

About the writer: The Writer is a Freelance International Columnist, Poet and Author of the Books "What Plagues Pakistan?"And "Live Balls of Fire"