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Soviet Union

Chapter 11. Economic Structure and policy

THE SOVIET UNION OF THE 1980s had the largest centrally directed economy in the world. The regime established its economic priorities through central planning, a system under which administrative decisions rather than the market determined resource allocation and prices.

Since the Bolshevik Revolution of 1917, the country has grown from a largely underdeveloped peasant society with minimal industry to become the second largest industrial power in the world. According to Soviet statistics, the country's share in world industrial production grew from 4 percent to 20 percent between 1913 and 1980. Although many Western analysts considered these claims to be inflated, the Soviet achievement remained remarkable. Recovering from the calamitous events of World War II, the country's economy had maintained a continuous though uneven rate of growth. Living standards, although still modest for most inhabitants by Western standards, had improved, and Soviet citizens of the late 1980s had a measure of economic security.

Although these past achievements were impressive, in the mid1980s Soviet leaders faced many problems. Since the 1970s, the growth rate had slowed substantially. Extensive economic development (see Glossary), based on vast inputs of materials and labor, was no longer possible; yet the productivity of Soviet assets remained low compared with other major industrialized countries. Product quality needed improvement. Soviet leaders faced a fundamental dilemma: the strong central controls that had traditionally guided economic development had failed to promote the creativity and productivity urgently needed in a highly developed, modern economy.

Conceding the weaknesses of their past approaches in solving new problems, the leaders of the late 1980s were seeking to mold a program of economic reform to galvanize the economy. The Basic Directions for the Economic and Social Development of the USSR for 1986-1990 and for the Period to the Year 2000, a report to the Twenty-Seventh Party Congress in March 1986, spoke of a "burden of the shortcomings that had been piling up over a long period," which required "radical changes, a profound restructuring." The leadership, headed by General Secretary Mikhail S. Gorbachev, was experimenting with solutions to economic problems with an openness ( glasnost--see Glossary) never before seen in the history of the economy. One method for improving productivity appeared to be a strengthening of the role of market forces. Yet reforms in which market forces assumed a greater role would signify a lessening of authority and control by the planning hierarchy.

Assessing developments in the economy, both past and present, remains difficult for Western observers. The country contains enormous economic and regional disparities. Yet analyzing statistical data broken down by region is a cumbersome process. Furthermore, Soviet statistics themselves may be of limited use to Western analysts because they are not directly comparable with those used in Western countries. The differing statistical concepts, valuations, and procedures used by communist and noncommunist economists make even the most basic data, such as the relative productivity of various sectors, difficult to assess. Most Western analysts, and some Soviet economists, doubt the accuracy of the published statistics, recognizing that the industrial growth figures tend to be inflated.

Data as of May 1989