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Collapse of the Soviet Union


The Collapse of Soviet Union coincided with the collapse of Communism as a concept. What factors were responsible for the collapse of communism in Soviet Union and why it still does not survive in many places in the world?

Soviet Union was a forced federation. While evolving as a political entity, the Russian army assimilated the frontiers as they marched. Ahead.

Later on in the aftermath of their awareness of hinterland location, and being on side of the winning alliance in 2nd World War, they gained prominence. The Soviets maintained their prominence by forced alliances, friendly alliances, strategic alliances (WARSAW pact) and ideological alliance till 1979 when they entered Afghanistan in the guise of maintaining that country.

Although some geographical advantages of theirs turned into a disadvantages for the Soviet Union there were host of factors by 1990 that led to decline of Soviet Union as a political entity as well as an Ideological and economic entity.

Soviet-style communism failed in the early 1990s after 70 years of struggle. The factors that led to its downfall were an inability to meet consumer demand, lack of proper motivation and labor incentives in the economic system, central-planning problems and mismanagement, inadequate agriculture, and
too much military investment.

1. Inability to meet consumer demand

The basic reason for not meeting consumer demand was poor quality and shortages of Soviet manufactured goods.

After World War II, rapid Soviet growth was possible with more labour, more capital and more land.
However, by the 1980s, these resources were being maximized, so no growth occurred, and in the 1990s
growth was negative.

The military machine and capital goods were all-important, so attempts were made to increase the production of these goods. However, this emphasis had several costly consequences.

  1. First, the percentage of output devoted to consumer products decreased. Store shelves became empty, and the standard of living dwindled.
  2. Second, the World Bank estimated that the manufacturing sectors of the economy were so heavily subsidized and overemphasized by the central economic planning groups that the Soviet Union lagged 12 to 15 years behind the United States and Germany in technological expertise and machinery. Refrigerators, televisions, radios, and automobiles were all extremely poor quality-primitive by German, Japanese, and U.S. standards.

Both these factors had an adverse effect on the citizens. Incentive problems already existed. The labor productivity of the average Soviet worker was only 35% that of his or her American counterpart.

Added to the incentive problems was the inability of the system to supply the goods and services that the
consumers wanted. Consumer expectations always outstripped supply.

Morale was lowered even more when the Soviet citizens quickly discovered-through satellite communications and television broadcasts from Western Europe and Radio-Free Europe-the gross difference in standard of living.

Understandably, the result of all these problems was extreme frustration and deteriorating confidence in the system. This unrest finally led to rebellion and the collapse of Soviet communism in 1991.

2. Lack of incentives and motivation

The Soviet system lacked incentives-the key ingredient of the capitalist system-for workers, for managers, and for competition. In a capitalist system, more work effort, greater creativity, and an improved product mean higher wages and promotions for workers. However, in the Soviet Union, work effort was not necessarily rewarded with higher wages or promotions. For the few workers who did receive promotions, even though their wages were higher, increased purchasing power never materialized because of what is known in economics as the ruble overhang: the accumulation of rubles by a society with no real wealth or purchasing power attached to them. If extra rubles are paid but no consumer goods are available for purchase, the ruble is worthless.

Another problem was that the output and mix of products and prices were determined by Soviet central
planners. In a capitalist system, if a product is in short supply, its price increases. The incentive is to produce more items to make more profit. When production increases, prices are forced back down because of the larger supply. These self-correcting mechanisms were absent in the Soviet system. Without such price changes, Soviet planners had no way to gauge whether their decisions were correct or incorrect. Thus, many products that were in high demand were in short supply and remained so. Other items remained stored in warehouses because of an overabundance and lack of demand. Because the planners determined the output, there were no incentives for managers to increase their supplies.

3. Mismanagement and central planning problems

The Soviet planning system that worked in the 1930s and 1940s, wherein production goals, quotas, prices, and supplies were set individually and separately from one another, could not work in the 1980s and 1990s because of the increased complexity of the international market. In the later years, there were far more industries for which to plan, and many more components and supplies for each item produced. The planners had to ensure that all resource demands were met and that final production targets were achieved. There were severe bottlenecks or chain reactions that were to be passed on to the consumer and to the state, which consumed a large portion of its own products. This resulted in severe resource immobilization.

Coordination is accomplished according to consumer wants, resource availability, and business efficiency and practices. However, duplicating this coordination with state-operated economic planning units run by individuals making arbitrary decisions on allocations, prices, and resources was very difficult.

4. Agricultural failure

Soviet agricultural programs were essentially disappointing. One-fourth the Soviet Union’s annual GNP and 30% of its labor force were engaged in agriculture, yet it became the world’s largest importer of food.

The efficiency of Soviet agricultural worker was very low. There is no question that the Soviet Union possessed a relatively small amount of good agricultural land, but it had enough land to be more productive.

5. Military waste

Throughout history, Russia and the Soviet Union have been repeatedly invaded from the outside. Most recently were invasions by Napoleon in 1805 and Hitler’s army in 1942. Prior to this, a series of other dictators and warring tribes had disrupted the region. Consequently, the Soviet Union became paranoid of its neighbors, especially its most powerful neighbors. In the later stages of the Cold War, fear was focused on the United States. This fear led to the arms escalation of the 1970s and 1980s, with thousands of nuclear warheads stockpiled on each side. The Soviet military expenditure accounted for 15% to 20% of the GNP. Consequently, much money that could have been used for investment, development, and growth was funneled into the military. At the same time, the most talented people were also channeled into the military as administrators and planners, including research scientists and engineers who created plans and devices for defense and attack military systems. This talent could have been best used in other sectors of the economy.

Conclusion

Communism has thrived as a theoretical government ideology in some places in the world but these countries are running on the basis of capitalism and market economies.

Communism has been considered too theoretical too idealistic and too rigid perhaps disregarding human psyche, and unable to understand goals aspirations of the individuals and the milieu under which the human beings forge their identity. So whether it is Venezuela, or Eastern Europe and pockets of Africa, the concept of communism thrives under a narrow limit of goals and niche solutions for want of other alternatives.

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