Collapse Of The Ussr - Economic Perspective

Introduction

The following text will examine the Soviet Union's transition from a communistic system over to a capitalistic state. It is our purpose to observe the underlying economic factors during the later years of the former Soviet Union and throughout the transition to capitalism to the present economic state of the Russian Federation. Do to the broadness of the phenomenon being investigated; the text will concentrate, in particular, on the Gorbachev era in the 80s' and how that period of time of political instability had an essential impact on the breaking of the Soviet Union. Further investigation will clarify the economic aspects involved in the transition, such as, governmental policies and the reasons behind a fatigued economy. The latter segment of the paper analyses the impact after the transition on the economy and the nation to the present day.

The breaking years

Introduction

The collapse of the Soviet Union has many underlying factors but the main issues can be categorized into the following: capital budget deficits, a burdened economy, military conflicts, an arms race against the U.S. and the worsening market situation. The latter will be further discussed in the subsequent sections.

Soviet ideology and economic analysis

At the time, USSR had the ideology of uniting all socialist countries with the goal of building up both socialism and being able to match and even surpass imperialist and capitalist powers for the supremacy in arms. Several analysts recognized this prevailing dilemma to which some predicted as the breaking of the Soviet Union. The Dumas analysis is an applicable approach to recognize the economic difficulties the Soviet Union encountered. Dumas argues that military production creates weakens the economy more so than any unproductive activity. He described military production as economically counter-productive and that in order to properly calculate GNP (Gross National Product), military counter-production and the society's unproductive activity should be taken out of the overall equation. Dumas came up with an alternative economic measure, the Social Material Product (SMP). SMP primarily measures the nation's economic performance by including useful activity, i.e. activity, which produces goods and services that can be linked back to a natural standard of living.

Technological insuffiency

The Soviet Union had particular difficulties in the vastly advancing global technological economy. The precise magnitude of Soviet militarization is hard to determine due to Soviet governmental secrecy and hide-ups. However, assuming the Soviet Union matches the U.S. in military research, then a good quarter of overall national R&D, during the years 1970-1984, went into military R&D. This added to both the U.S.'s and the Soviet Union's technological stagnation during the 80s. Both countries were in a disadvantage in the technological competition against e.g. Germany and Japan, due to less attention on military production and more attention on global markets and goods. Military spending was considered by western economists as counter-productive, however a phenomenon Soviet economista failed to link to the stagnation of the nation's economy. Unlike the USSR, capitalist countries and their integrated connections were able to profit the working class from the arm race, despite the lag in technological advancement. This was one of the underlying advantages the U.S. had over the Soviet Union.

Scientific roadblocks

Soviet scientists in the civilian world had a lack of resources in both quality and quantity. All resources and assets were forwarded to the military and their scientists. Civilian scientists had inferior equipment, funding and limited access to foreign support. They worked in poor conditions and in an irregular environment. Civilian scientific developments were submitted to the government, i.e. military scientists for further examination and credit was failed to be given or even recognized. Military research spending and secrecy added to the constant strain on the nation's economy, which eventually spiraled into a draining of economies and a disadvantage in global markets.

Resource allocation

Not only was technological stagnation hindering economic production in the Soviet Union, but also as Dumas made clear, the diversion of all capital investment had severe effects on counter-production of the economy. The U.S. was claimed to use 38% of all new plant equipment investments for military investments during the years 1980-1982. A Soviet political spokesperson claimed that the Soviet defense industry made up for a mere 6.4% of all Soviet industrial assets; a figure drastically underestimated according to Western analysis. However, looking at the nation's poor economic situation and counter-production, 6.4% of assets inevitably put a strain on scientists, engineers, heavy machinery etc. The outcome of mass military production could be primarily seen in severe trade and quality goods deficits and a technological lag. Deficits in the educational structure and medical system were also apparent. Despite the nation's abundance in resources and assets, the Soviet Union failed to efficiently allocate its resources to initiate a stabilizing process for the weakening economy.

The inevitable collapse

In the late 80s and early 90s, the over burdened Soviet economy, the futile arms race against the West and the military spending all attested to the final breaking of the nation. The Soviet Union's arsenal supremacy race differed to the U.S.'s, in the sense that, the U.S. was integrated with global capitalist markets which enhanced international trade and especially provided an abundance of imports into the U.S. The Soviet Union did not have such an advantage and despite the nation's unsuccessful attempts to match the U.S. in e.g. production, the Soviet Union lacked a sufficient baseline economy to compete with. The Soviet Union was draining more assets than the U.S., due to its poorly functional global trade. The nation was fraught with capping regulations in e.g. the conducting of international business and global trade. The country also had massive and constant shortages in goods and services, and annual economic losses of $30 to $50 billion, not to mention the losses it suffered from the lack of profits from imperialistic trades. The latter all contributed to the breaking down and collapsing of the Soviet Union. A general consensus is that the Soviet