Soviet statistics

Louis Proyect lnp3 at
Fri Aug 20 09:52:46 MDT 1999

>From Dollars and Sense Magazine: WHY DID THE USSR FALL?


By David Kotz and Fred Weir

David Kotz teaches economics at the University of Massachusetts-- Amherst.
Fred Weir is a journalist living in Russia. This article is based on their
book, REVOLUTION FROM ABOVE: The Demise of the Soviet System (NY:
Routledge, 1997).

Conventional wisdom tells us that the remarkable demise of the Soviet Union
in 1991 was propelled by the collapse of its socialist economy, leading the
citizenry to peacefully sweep aside the nation's Communist leadership and
their misbegotten socialist system. Yet, if one inquires into the
whereabouts of the allegedly deposed Communist leaders, one finds most of
them not languishing in exile, but still in high-level positions in the 15
new nations that emerged from the USSR. Furthermore, most of them are a
great deal richer than they were before the Soviet Union's demise. Two
years after this odd revolution, 11 of these 15 new nations were headed by
former top Communists.

In contrast to the conventional wisdom, the Soviet revolution of 1991 was
made, not against the small elite that ran the Soviet Union, but rather by
that elite. And it was not a collapse of the USSR's planned economy that
drove this process, because no such collapse took place. While the Soviet
planned economy encountered serious problems after the mid-197Os, it was
far from collapsing at the end of the 198Os. Rather, the Soviet elite
dismantled their own system in pursuit of personal enrichment.

Correctly understood, the USSR's downfall was caused by the undemocratic
features of its system, not by the failure of economic planning. This
interpretation provides hope that a democratic form of socialism would
bring about greatly improved living conditions and economic stability for
all members of society, not just an elite-- whether capitalist or communist.


For a decade after the Russian Revolution of 1917, the Bolsheviks
experimented with various forms of economic organization. Not until the end
of the 192Os was what came to be called "the Soviet system" put in place.
It was characterized by public ownership of nearly all nonagricultural
businesses and detailed planning from Moscow of productive activity across
the vast country. Many Western socialists decried the extremely centralized
and top-down form of economic planning adopted in the Soviet Union and
condemned the authoritarian, repressive form of government that accompanied

Income differences were much smaller than those in capitalist countries,
and every worker was guaranteed a job. But a privileged and insulated
"party-state elite" of high-level officials in the ruling Communist Party
and the government ran the system and monopolized the best consumer goods.
The Soviet system may have had some socialist features, but it was a far
cry from the democratic system of popular sovereignty in both economy and
government that socialists around the world had long imagined and worked
toward. After Soviet dictator Josef Stalin's death in 1953, the brutal and
murderous regime he had presided over since the early 193Os evolved into a
more moderate form of authoritarianism, but the basic institutions of the
system remained unchanged until the Gorbachev reforms of the 198Os.

Despite the crimes perpetrated in its early decades and the continuing
departures from the socialist ideal, the Soviet system brought rapid
economic progress for some 50 years after its creation in the late 1920s.
The transformation from a rural, agricultural economy to an urban,
industrialized one--a process taking 30 to 50 years in other countries, was
accomplished in only 12 years, during 1928-40.

Some scholars think that Stalin's forced collectivization of the peasantry,
the extreme reduction in their living standards, and the brutally
authoritarian work relations in industry largely account for the rapid
industrialization of 1928-40. But we believe that Stalin's atrocities,
rather than speeding economic growth, instead slowed economic progress by
provoking passive resistance from the population.

It was the Soviet Union's socialist features, not its repressive ones, that
deserve credit for the nation's rapid industrialization.

Excluding the period of war and recovery associated with World War II, much
of which was fought on Soviet territory, the Soviet gross national product
(GNP) grew at a high average rate of 5.1% per year during 1928-75, based on
Western estimates (see Table 1, p 24). Even during 1950-75, after basic
industrialization had been completed, the Soviet economy still grew
rapidly--much more rapidly than the US economy during those years, as Table
1 shows.

The Soviet system had several economic growth advantages over capitalism.
These included the ability of economic planners to devote a large part of
national output to investment in capital goods and in education and
training of the labor force, absence of the periodic recessions that
afflict capitalist economies, and the achievement of continuous full

Growth in GNP is an imperfect indicator of economic improvement over time,
but other measures confirm the USSR's rapid progress. By 1975 the formerly
backward Soviet Union had surpassed the United States in output of crude
and rolled steel, cement, metal cutting and metal forming machines,
tractors and combines, wheat, hogs, milk, and cotton. In 1960 about half of
Soviet families owned a radio, one out of 10 a television, and one out of
25 a refrigerator; by 1985 there was an average of one of each per  family.
By 1980 twenty million Soviet citizens had college degrees. That same year
the USSR had more doctors and hospital beds per capita than the United
States, and life expectancy had risen to 69 years, only five years below
life expectancy in the United States. By the 1970s Soviet prowess in
science, technology, and economic growth had Western governments worried.
Many feared that the future might belong to the Soviet model by virtue of
its economic successes, despite its many undesirable features.

After 1975 Soviet economic growth slowed markedly and its rate of
technological advance also declined. By 1985 Soviet leaders knew they had a
problem. The US economy had been advancing more rapidly than the Soviet for
a decade, a reversal of the past trend. Furthermore, competing with the
Reagan administration's military buildup that began in 1981 placed a large
burden on the Soviet economy.

Soviet leader Mikhail Gorbachev came to power in 1985 partly due to the
Soviet leadership's realization that serious economic reform was required.
But Gorbachev's reforms failed to significantly improve the GNP growth
rate, which rose only to 2.2% per year during 1985-89 from the previous
decade's 1.8% rate (see Table 2, p 24).

The GNP growth rate in 1975-89, while disappointing compared to the Soviet
economy's past performance, was a far cry from economic collapse. The
Soviet economy did not experience a single year of falling GNP during
1975-89, while the United States had three such years.

Worsening shortages arose for some consumer goods in the late 1980s,
producing long lines at stores. Western observers assumed at the time that
this reflected a collapse of production. But the shortages actually
resulted from household income rising faster than consumer goods output.
The culprit was economic reforms that decentralized control over wages to
the individual enterprise level.

In response, household money income, which had been rising by only 3% to 4%
per year in the mid 198Os, suddenly rose by 9.1% in 1988 and 12.8% in 1989.
With prices fixed by the central planners, cash-flush consumers quickly
emptied store shelves, yet real consumption kept rising. While economic
performance was lackluster in the 1980s, it was not consistent with the
popular view that the Soviet planned economy collapsed.

In 1990 and 1991, however, conditions changed. During those years Gorbachev
and the Soviet government gradually lost power to the political movement
led by opposition figure Boris Yeltsin. In May 1990 Yeltsin gained control
over the Russian Federation, which was then a republic of the Soviet Union.
As chief executive of the Russian Republic, Yeltsin was able to gradually
seize political and financial power from the Soviet government. In June
1990 Yeltsin persuaded the Russian republic's legislature to declare its
sovereignty over all economic resources within the Russian republic.
Economic planning was dismantled during this process, and the highly
integrated Soviet economy then indeed began to rapidly contract (see Table
2). This contraction, however, was not due to any inevitable
"unworkability" of a planned economy; it occurred because economic planning
was discontinued, leaving the economy with no effective means of coordination.


How was an opposition political movement able to peacefully dismantle the
Soviet system, which had faced no effective internal opposition since the
1920s? The answer to this question is found in Gorbachev's efforts to
reform the Soviet system, and his efforts' unexpected effects on Soviet

Gorbachev and his associates believed that the key flaw in the Soviet
system was lack of democracy. They held this responsible both for the
serious social and economic problems that had afflicted the Soviet system
since the late 1920s and for the relative economic stagnation which had set
in after 1975. Restructuring the Soviet system to allow real popular
participation, both in the government and in economic decisionmaking would,
they argued, finally bring out the true potential of a socialist system.

Accordingly, Gorbachev's reform program, known as "perestroika"
(reconstruction), had three components. "Glasnost," which meant lifting
restrictions on public debate and political organizing, would free the
citizenry to participate in public affairs. Democratization of the
government, through instituting free elections and eliminating strict
Communist Party control over the state, would permit the people to assert
sovereignty in the political realm. Economic reforms were aimed at
democratizing and decentralizing economic planning. New legislation shifted
some power down to the individual enterprise level, where workers were
accorded the right to select the enterprise director. The reforms also
introduced a limited degree of market control, giving consumers more
choices and more was produced.

Glasnost led to a flowering of many different political groups holding
various viewpoints about the best future for the Soviet Union. Three
positions found the greatest support. One was the leadership's program of
building a restructured and democratic socialism. The second was a call to
return to the pre-reform authoritarian system. The third was an
increasingly open advocacy of abandoning socialism in favor of capitalism.
Glasnost made it possible to advocate viewpoints in opposition to the
leadership, and the democratization of Soviet politics made it possible for
newly formed opposition groups to legally contend for power. The economic
disruptions occasioned by the economic reform efforts tended to undermine
public support for Gorbachev and his associates. However, the
pro-capitalist grouping, led by Boris Yeltsin, emerged victorious mainly
because it won the support of the overwhelming majority of the party-state
elite--the most powerful group in Soviet society. That the party-state
elite would opt for capitalism seems at first glance implausible. It is as
if the Roman Catholic Church hierarchy suddenly converted to atheism, or
the US Chamber of Commerce called for the nationalization of private
business. Yet just such a  remarkable turnabout took place in the Soviet
Union. By the 198Os most members of the Soviet party-state elite--the high
officials in the Communist Party, the state, and the system of economic
management--had long since ceased to believe the ideology of the system. As
studies by Western Soviet specialists such as Alec Nove, Mervyn Matthews,
and Kenneth Farmer discovered, the post-World War II Soviet elite consisted
largely of ambitious individuals, lacking any strong personal conviction,
who had risen into the elite in search of power, prestige, and material

When in July 1991 one of the authors asked Nikolai L., a longtime member of
the Soviet elite, whether he was a member of the Communist Party, he
responded, "Of course I am a member of the Communist Party-- but I am not a
Communist!" As Gorbachev's reforms opened the future direction of the
system to debate, the members of this opportunistic elite evaluated the
alternatives based on their own interests. Most of the elite concluded that
the democratized socialism advocated by Gorbachev offered no advantages for
them. Democratic socialism threatened to eliminate the arbitrary power they
had exercised over the citizenry and to reduce their material privileges.
The Soviet elite included some genuine believers in the ideals of
socialism, including Gorbachev himself, but they turned out to be a small

Some opposition groups called for returning to the pre-reform Soviet
system. But surprisingly few members of the elite found this a persuasive
position. While the pre-reform system had promoted them into the elite,
their material privileges were nevertheless restricted by the socialist
pretensions of the old system. They were forbidden to own property or
accumulate wealth, and their privileged lifestyle depended entirely on
their position in the hierarchy. Displeasing a superior could lead to
demotion and loss of the luxuries to which they had become accustomed. When
a dozen high-level supporters of the old system tried to pull off a coup in
August 1991, it quickly collapsed as the would-be new leaders found almost
no support within the Soviet elite for  their attempt to reinstitute the
old system.

By contrast, capitalism held great appeal for most of the elite. They
noticed how much richer their counterparts in the West were than they, not
only absolutely but relative to the average living standard of their
country. The Soviet system had enormously valuable assets, and they
realized that, if the system were converted to capitalism, they would be
the best positioned to become the new owners of these assets.

Indeed, that is just what happened. Russia's Prime Minister since December
1992, Viktor Chernomyrdin, was Minister of Natural Gas in the Soviet days.
Today he is believed to be the largest shareholder of the privatized
company Gazprom, which controls the Soviet Union's 20% to 35% of the
world's natural gas reserves, and appears to be one of the world's
wealthiest individuals. One survey found that 62% of the 100 richest
businessmen in Russia had previously been members of the Soviet party-state
elite (most of the other 38% apparently came from organized crime
backgrounds). It also found that 75% of high-level political leaders in
President Yeltsin's administration in post-Soviet Russia came from the
Soviet elite.

The Soviet elite was not defeated by a democratic revolution from below in
1991. Rather, they remained in power, discarded their Communist identity,
and proceeded to divide up the wealth of the Soviet system among themselves.

A study of the Moscow elite in June 1991 by Judith Kullberg, an American
political scientist, confirmed that the conversion to capitalism was
widespread within the top layer of Soviet society. Of the sample of the
elite studied, 77% supported capitalism, 12% democratic socialism, and 10%
held a "Communist or Nationalist" position.

The views of ordinary Soviet citizens were vastly different. In May 1991
the Times-Mirror Center for the People and the Press, an American survey
research firm, conducted a large-scale public opinion survey in European
Russia. It found that, as in the above elite survey, only 10% favored the
pre-reform system. But 36% in the public opinion survey favored democratic
socialism and another 23% favored the Swedish model of social democracy.
Only 17% wanted "capitalism such as found in the United States or Germany"
(14% had no opinion). Thus, a large majority (69%) of the public apparently
wanted some kind of socialism or social democracy, and few wanted
Western-style capitalism. Other public opinion surveys conducted at the
time found even less support for capitalism than did the Times-Mirror poll.

But despite the significant democratization of the Soviet system during
1985-91, most ordinary citizens remained politically inactive. The
party-state elite, positioned at the pinnacle of the social pyramid, had
the power to overcome the resistance of Gorbachev and his associates,
despite the public support for Gorbachev's aims, and turn the Soviet Union
toward capitalism. Because the leader of the pro- capitalist movement,
Boris Yeltsin, won institutional power within the Russian republic, while
Gorbachev retained control of the central Soviet state, the pro-capitalist
movement's achievement of full state power required dismantling the Soviet
state. Such a move had no legal or constitutional basis, and a 1991
referendum found that more than three-fourths of Soviet voters opposed it.
Separating Russia from the Soviet Union was the only feasible way for
Yeltsin and his movement to pursue a capitalist transformation.


The demise of the Soviet system does not show that a system based on public
property and economic planning is unworkable. It does show that a
relatively egalitarian planned economy run by a privileged elite is, in the
long run, an unstable system. Once the founding generation of revolutionary
believers passes away, the ruling elite will eventually realize that
maintaining the socialist elements of such a system is not in their
interests. In the Soviet Union, this process occurred amidst the turmoil of
an attempt to transform the system into a democratic form of socialism.

In China, the party-state elite is also pursuing their economic self-
interest, but by a different path. Instead of jettisoning Communist Party
rule, they are using it to build a rapidly growing capitalist sector of the
economy, which will eventually displace the planned, publicly owned sector.
The children of top Chinese party officials are using their connections to
establish themselves in lucrative positions in the new private businesses
that have emerged.

Only a democratic form of socialism, based on popular sovereignty in the
economy as well as in the state, would be viable over the long run. An
empowered population in such a system would resist any attempt by a
minority to gain control of the wealth created by the people. We believe
that democratic socialism, lacking the distortions that ultimately weakened
the Soviet system and left it open to capitalist transformation, would be
superior in economic performance, as well as social justice, to either a
Soviet-type system or capitalism.

Through economic planning, democratic socialism can assure full employment,
avoid recessions, and invest heavily in developing human capacities as well
as new technologies. Having no class of wealthy property owners, income
would be distributed much more equally than under capitalism. In contrast
to capitalism's blind drive for profits, democratic  socialism would
empower people to guide economic development along a path of sustainable
economic progress. Such a path would increase living standards, reduce the
time devoted to undesirable forms of labor, avoid degrading the natural
environment, and fairly share the fruits of economic improvement.

Soviet history does show that economic planning and public enterprise, even
in the distorted Soviet form, can bring rapid economic progress. The belief
that democratic socialism would do even better cannot be proved by
reference to any historical example, since it has not yet existed on a
large scale anywhere. But nothing in the Soviet experience, accurately
understood, undermines the promise of democratic socialism.

Resources: The Economy of the Former USSR in 1991, International Monetary
Fund, 1991; "Is There a Ruling Class in the USSR?", Alec Nove, Soviet
Studies, 1975; The Soviet Administrative Elite, Kenneth C. Farmer, 1992.


Period    USSR  USA

1928-40  5.8% 1.7%
1940-50  2.2% 4.5%
1950-75  4.8% 3.3%
1975-85  1.8% 2.9%

Source: Revolution from Above: The Demise of the Soviet System, Kotz with
Weir, Figures 3.1 and 3.2. Original sources: The Real National Income of
Soviet Russia since 1928, Abram Bergson, 1961; Measures of Soviet Gross
National Product in 1982 Prices, Joint Economic
Committee, US Congress; others.


Year GNP Growth Rate
1986 4.1%
1987 1.3%
1988 2.1%
1989 1.5%
1990 -2.4%
1991 -12.8%

Source: Kotz with Weir, Table 5.1. Original
sources: Measures of Soviet Gross National
Product in 1982 Prices, Joint Economic
Committee, U.S. Congress; others.&&

Louis Proyect


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