Prelude

That is a great question, but sadly such a seemingly simple question brings with it a long answer that consists of various overlapping factors which all interwoven with one another to make up the socialist experiment we call the Soviet Union.

I’ve gone over something similar on another question, although it wasn’t specifically about the USSR but rather most of the socialist bloc in general at the time and why it collapsed both from internal and external pressures which accumulated in their overthrows during the late 80’s and early 90’s. You can check it out below!

But when it came to the USSR, the subject matter is still one of staunch debate within the halls of academia and a concrete consensus on Soviet History and why it fell apart is long from being firmly established. For the sake of brevity, I will mention and leave my sources at the end of this post, so that way you can check them out yourself. So prepare yourself for a long summarized dive into the Soviet Political Economy.

It is undeniable that the Soviet Union was a force to be reckon with in terms of industry and economic growth for it’s time, beating back the Nazi’s through sheer size and determination. It was powerful. But underneath it’s veneer of power lay a socio-political structure rotten to its core and bloated with a series of contradictions that held back it’s potential until it eventually collapse in on itself. What these contradictions are and how impactful they were on the Soviets depends on what political ideology you uphold. But based on the research I’ve done, I can pretty confidently say that whilst the Soviet Union wasn’t a totally totalitarian nightmare state capitalists like to portray it as, it wasn’t exactly a workers paradise either as Marxist-Leninists like to show it. But it’s in this clash of visions over the memory of the USSR that a-lot of misconceptions came about as a result of this ideological battle that need to be dispelled. I may get some dirt from my fellow comrades on the left and pals or douches on the right for what I’m gonna say but regardless I’ll let the facts speak for themselves.

Sit down it’s gonna a long one…

Whilst it is true that much of the Soviet Economy was centrally planned and coordinated by the state, a certain degree of market economics still existed within the Soviet Union. Especially in industries where the central authority lacked the proper means of making it compatible with the planned economy. Local farmers markets, small businesses, family enterprises, and small Independent worker or customer co-ops did exist in some capacity and varied depending on where and when you lived during the Soviet Union.

Since you have to remember that the Soviet Union wasn’t a singular whole but rather a ‘strong’ federation of 15 separate socialist republics, not including the dozens of other autonomous republics within those larger republics. The Baltics were generally more relaxed in terms of allowing a degree of private initiative compared to their sister republics like Russia and Ukraine. Which is partially how and why compared to the other former socialist republics, the Baltic countries of Lithuania, Latvia, and Estonia fared better than their counterparts in terms of economic growth and preserving a high quality of life following the USSR’s collapse.

image Source: GDP per capita (current US$) - Russian Federation, Estonia, Lithuania, Latvia, Kazakhstan, Turkmenistan, Belarus, Azerbaijan, Georgia, Armenia, Ukraine, Uzbekistan | Data

It’s kind of like the United States of America in the sense that while all the states abide by and follow federal law, they are entitled to a significant degree of autonomy and to an extent determine their local socio-economic policies as set by the nation’s constitution. However, unlike the United States, despite repeated attempts to integrate the people of the USSR into “model soviet citizens” united under the banner of a common identity built upon class solidarity, it didn’t exactly worked out that way.

Nevertheless even in the 1936 Soviet Constitution written and approved by Stalin, a small degree of private enterprise was tolerated and protected, so long as the firm in question doesn’t unjustly exploit others in not properly compensating or giving proper consent to the workers for the full value of their labor and follows state guidelines.

“ARTICLE 9: Alongside the socialist system of economy, which is the predominant form of economy in the U.S.S.R., the law permits the small private economy of individual peasants and handicraftsman based on their personal labor and precluding the exploitation of the labor of others.”-(1936 USSR Constitution)

This was continued over into the new 1977 Soviet Constitution.

“Article 17: In the USSR, the law permits individual labour in handicrafts, farming, the provision of services for the public, and other forms of activity based exclusively on the personal work of individual citizens and members of their families. The state makes regulations for such work to ensure that it serves the interest of society.”

The Soviet Union went out of its way to distinguish different kinds of property and their respective laws and rights by dividing them into three distinct types, Public, Personal, and Private(or the 3 P’s as I call them).

Public Property is owned by the state for the collective good of the people by utilizing the means of production to satisfy the needs of the citizenry and ensure good public will and health, as it’s meant to benefit the whole, not the few. As it is detailed in the 1977 Soviet Constitution:

“State property, i. e. the common property of the Soviet people, is the principal form of socialist property.

The land, its minerals, waters, and forests are the exclusive property of the state. The state owns the basic means of production in industry, construction, and agriculture; means of transport and communication; the banks; the property of state-run trade organizations and public utilities, and other state-run undertakings; most urban housing; and other property necessary for state purposes.

-Article 11″

Private Property is the utilization of the ownership of the means of production by private firms and identities for the sake of profit accumulation at the expense of the workers by exploiting them through denying them the full value of their labor. Seeking it’s complete abolition.

Finally there is Personal Property which is property meant for an individuals personal use, a person’s house, earned income, and yes even their toothbrushes are the person’s property, that they earned through the fruits of their own labor, thus it is spared and protected.

“Article 13: Earned income forms the basis of the personal property of Soviet citizens. The personal property of citizens of the USSR may include articles of everyday use, personal consumption and convenience, the implements and other objects of a small-holding, a house, and earned savings. The personal property of citizens and the right to inherit it are protected by the state.

Citizens may be granted the use of plots of land, in the manner prescribed by law, for a subsidiary small-holding (including the keeping of livestock and poultry), for fruit and vegetable growing or for building an individual dwelling. Citizens are required to make rational use of the land allotted to them. The state, and collective farms provide assistance to citizens in working their small-holdings.

Property owned or used by citizens shall not serve as a means of deriving unearned income or be employed to the detriment of the interests of society.”-(1977 USSR Constitution.)

“ARTICLE 10: The right of citizens to personal ownership of their incomes from work and of their savings, of their dwelling houses and subsidiary household economy, their household furniture and utensils and articles of personal use and convenience, as well as the right of inheritance of personal property of citizens, is protected by law.”-(1936 USSR Constitution)

This social relationship in private property is what the Soviets were most focused on, not your house. Hell in the early years of the Soviet Unions existence, it’s founder Vladimir Lenin enacted a series of Market policies called the New Economic Policy(or NEP) might to jumpstart the Soviet Union’s struggling economy following the disastrous aftermath of World War 1 and the Russian Civil War, by granting the peasants(namely the Kulaks or ‘wealthy peasants’) the right to private ownership and domestic trading, whilst the government controlled the foreign trade sector and major industries such as energy and manufacturing. When the Bolsheviks had taken over the Russian Empire to transform it into the Soviet Union, they inherited a largely agrarian nation, where most of the population worked in agriculture. Before 1914 Russia was becoming a burgeoning industrial powerhouse, but much of it’s industrial growth came about as a result of foreign investment through the selling of agricultural produce and material exports on the global markets. However, the subsequent first World War, Russian civil war, the policies of “War Communism”, and international embargoes placed upon Russia by it’s former trade partners devastated the nation’s economy and industry. The purpose of the NEP was to boost agricultural productivity and then sell the grain harvested to outside markets to buy machinery and technology necessary to industrialize the country and rebuild it’s industry in order to compete with the western capitalist nations. Nevertheless despite some success, there was trouble in paradise as Oscar Sanchez-Sibony phrased it in his book Red Globalization:

“Although the NEP was quite successful in restoring Russia’s former economic output, foreign trade languished through the 1920s causing Russia’s technological level to fall further behind the West’s. In fact, the foreign trade sector, having come under the state’s control as one of Lenin’s commanding heights, was one of the worst-performing sectors of the young Soviet Union’s economy. Operations had been taken over by the People’s Commissariat of Foreign Trade in June 1920, with the acting Commissar of Trade and Industry Leonid Krasin at its helm. Krasin himself had emphasized Western credits, concessions, trade, and loans to reinstate the economy’s tsarist model, and he wanted to establish a commissariat that focused on those goals. At the root of the foreign trade failure in the NEP era was, predictably, the failure of grain marketing.”-(pg. 34–35)

It also didn’t help that Lenin tied the Soviet Rubble to the Gold Standard to encourage and stabilize foreign investment and credit, which proved unstable and dysfunctional, and as global grain prices fell; due to greater mechanization and modernization of the agricultural industry, opening new arable lands to cultivate and harvest, and improvement in transportation which help brought larger yields, reducing the demand in labor. The global market over-flowed with agricultural products, the supply significantly outpaced the demand, drastically depressing the price of goods to below profit sustainability. Soon enough the country begun to suffer, as peasants started hoarding their grain supplies to weather the economic shitstorm to wait for better times or feed the grain to their livestock to compete in the growing meat industry. Along with poor harvests and bad currency policies, the USSR struggled with a deficit problem, as the value of it’s currency was falling drastically when it’s gold standard collapse, making it become a grain importer.

Soon enough rising food prices pressured the young government to implement sweeping food price controls to ensure that the people could be feed. This sparked a debate within the politburo over what to do with the crisis and although many like to frame the time spent between Lenin’s death and Stalin’s rise to power, as a battle of conflicting ideologies. It was just as much as(if not more) of a dispute to handle a thorny economic crisis, as it was about ideological squabbles. Within the Soviet Government, two factions emerged, the Leftist opposition lead by Trotsky and the Right Opposition lead by Bukharin and Rykov. Trotsky advocated for a revolution from above, a system of land redistribution and collectivization to assist in boosting agricultural production and serve to spread global revolution. Whilst Bukharin and Rykov championed their continued support for the NEP, opposing Trotsky and his idea of “Permanent Revolution”. As the USSR lacked an economy sufficient enough to stand on it’s own against the capitalist states, so the Rightists forged an alliance with Stalin and his Centre-faction in exiling Trotsky, disbanding the leftist opposition, then championing a new policy of economic self-sufficiency and committed central planning called “Socialism in One Country”. It was through this commitment towards establishing socialism in one country that set the path forward for the rest of the Soviet Economy, as Stalin solidified power around himself and the politburo, by discharging then later executing his former allies like Bukharin and Rykov on charges of treason.

Stalin begun to implement the first of many five-year plans, which saw the re-instatement of “War Communism” by forcibly confiscating the lands, grain, and livestock belonging to the Kulaks to eliminate them as a class and ‘encouraging’ smaller peasants to join farming collectives to boost agricultural productivity to increase output by fulfilling their quotas to increase the country’s military and industrial strength.

Although the short-term benefits paid off well, the human capital wasted in the development of these five-year plans retarded the Soviet Agricultural sector in the long term, as a bloated bureaucracy emerged which kept the sector underdeveloped and inefficient to fulfill quotas and stripped the peasantry and rural workers of their autonomy, thus killing initiative, productivity, and innovation, trying to keep up with growing Urban and Industrial demand. With the liberalizing reforms of Mikhail Gorbachev and Nikita Khrushchev proving ineffective in trying to make the agricultural sector in the USSR more competitive and efficient. In some cases, even making it worse.

Nevertheless, Industrial output grew, the population begun to steadily increase following 1931–32, and more people began to flock into the cities, which did help stabilize the Soviet Economy and strengthen itself for the time being by heavily focusing on heavy industry and military expenditures. So despite it’s initial hardships, Stalin’s policies turned out well enough and kick-started an economic boom.

(Keep this in mind for later)

But now we’re running into a certain problem…

When measuring economic growth and GDP it can be kinda tricky, especially since the USSR didn’t measure growth in terms of Gross Domestic Product but rather GNP or Gross National Product. Yes there is a difference between GDP and GNP.

“Gross domestic product (GDP) is the value of a nation's finished domestic goods and services during a specific time period. A related but different metric, the gross national product (GNP), is the value of all finished goods and services owned by a country's residents over a period of time.

Both GDP and GNP are two of the most commonly used measures of a country's economy, both of which represent the total market value of all goods and services produced over a defined period.

There are differences between how each one defines the scope of the economy. While GDP limits its interpretation of the economy to the geographical borders of the country, GNP extends it to include the net overseas economic activities performed by its nationals.”-

So when trying to convert GNP over to GDP, depending on who’s doing the measurements or data collection, the results could vary drastically, and since the USSR has a habit of exaggerating their data or not possessing complete data, it’s up to observers to figure out where to patch the gaps in the trends. The most liberal estimates come from the CIA portrayed the USSR as an industrial behemoth whose GDP was more then 3X that of the UK, just below the USA.

Whilst conservative estimates made by the likes of those like Grigorii Khanin and Anders Åslund put the USSR’s total GDP anywhere on par between the UK and Brazil, making it resemble more of a middle-income country.

Now when you compare it to the USA like many capitalists do online, of course it appears as if the USSR is lagging behind and struggling, but this is a clear instance of statistical misreading and ignorance of historical context. As the United States is a nation with the advantage of being geographically isolated and far away from it’s enemies, meaning it could keep growing without worrying too much about being sacked. As well as not enduring the personal damages and cost of conflicts on a much larger scale such as the World Wars which would hamper their economic development. Furthermore, the US almost relied on Imperialism to some extent to expand outward to yield more profitable gains by going into new markets or exploiting lesser developed nations to enrich itself. It’s industrial revolution also kicked in much early than in Russia. Meanwhile the Soviet Union started off devastated from a bloody mess of two world wars, a civil war, and a country that’s been mostly agrarian throughout it’s entire history, always lagging behind the great European powers. So to compare the USA to the USSR is like saying that because apples and oranges are both fruits, they must taste the same! It’s a false comparison. Of course, a country with an industrial head-start, perfect geographical position, and economical imperialism would be better off.

Personally I find it more useful to compare states similar in economic or historical development to the USSR and see how it works, which it turns out, in comparison to most other countries, the USSR and other socialist states like it, achieved a higher physical quality of life than capitalist states of similar development, drastically lowered poverty and economic inequality, ate as much food as their American counterparts, with one of the highest literacy rates in the world, making great strides in new technologies and innovations, and created more opportunities and rights for women than ever before in Russia.

The time marked between 1928–1970 was all things considered was a boom period, marked by rapid industrialization, mass employment, growing national income, and greater economic prosperity. Say what you will about the draconian measures utilized by Stalin to achieve it, nevertheless it produced effective results. But following 1970, the Soviet Union begun to enter a period of stagnation, as it got itself stuck within the middle-income trap, a phenomenon where a countries economic development that attains a certain income (due to given advantages) gets stuck at that level, not able to grow much further. As contrary to both Capitalist and Marxist narratives, the Soviet Union was more vulnerable to changes in the global market than other capitalist states such as the United States. The Soviet Union was a largely resource-exporting economy with a strong(albeit moderately seized) manufacturing sector which dwindled in importance as the decades persisted. The Soviet Union did make large amount of producer goods, but it lacked a significant service-sector to meet up with the increasing demand for consumer goods, leading to shortages. So the Soviet Union had to rely on the good will of their capitalist European brethren and their socialist allies in the third world to compensate for their lack in consumer goods.

The Issue was that the Soviet Union didn’t have much to trade, as despite it’s large quantities of producer goods, many were in poorer quality than those of their western counterparts. So it’s commercial relations were more akin to bartering agreements than currency exchanges or trade arrangements. As Oscar Sanchez-Sibony recounts: “The fate of eight Soviet Ilyushin IL-18 airplanes sold to Ghana in the early 1960s will serve by way of illustration. A Soviet delegation to Ghana ascertained Ghanaian claims that of the eight airplanes sold to that country, only four worked regularly, but clocking a mere fifteen hours of flying time each month on average. By comparison, the single Bristol Britannia airplane in the country’s fleet was flying 113 hours monthly, and costing the government less in repairs. It would seem, then, that the value of the one British plane – all other characteristics being equal – was almost twice that of the eight Soviet planes.”(Pg. 21 Sibony)

So to encourage good will among its constitutes, the USSR begun to transition from a manufacturing seller to a commodity-exporting economy and often states reliant on commodity exporting are more sensitive to drastic fluctuations of resource pricing on the global market. But in the meantime, it did pay off well enough, as the Soviets committed to extensive trading deals and bargains with sympathetic states in the third world such as Egypt, Indonesia, Guinea-Bissau, North Korea, Cuba, Afghanistan, Congo-Brazzaville, and India, describing itself as the protector and promoter of the Third World from capitalist exploitation(Pg. 121 Friedman). The Soviet Union in a symbolic gesture declared that they would not place any import tariffs on goods coming from Africa, Latin-America, and Asia (Pg. 127 Friedman). It even became Europe's primary source of energy, as it exported large amounts of coal, oil, natural gas, and gold in exchange for capital and investment.

However, that image started to crack, when a loose alliance lead by Tito’s Yugoslavia consisting of 77 developing nations pledged an oath of non-alignment to neither the USSR or USA. This angered the leadership of the USSR, which begun to crackdown on dissent in it’s puppet regimes in Eastern Europe,

The situation kept getting worse for the Soviets, as the Soviet High-command under the constant fear of foreign encirclement and sabotage, poured large amounts of surplus spending and wasteful production into furthering the research and development of the military, which came at a cost of struggling to maintain other aspects of the nations infrastructure such as healthcare. In order to keep pace in the arms race against the USA. To add on top of that shit storm, the de-Stalinization of the USSR along with the subsequent Sino-Soviet split and inability to stabilize the competing interests of the socialist republics under Khrushchev, the populace became demoralized and the ideological cohesion of the Soviet Union begun to breakdown.

When Khrushchev was overthrow and replaced with Leonid Brezhnev, one of Leonid’s stupidest reforms included that the cadres, the government officials in charge of running the planned economy, who would be frequently rotated every five years to ensure stability, accountability, and new blood entering the system was revoked. Cadres could stay in their posts indefinitely which lead to a growing class of incompetent state bureaucrats who parasitically feed off the working classes by extracting their surplus labor all for themselves to cruor favor within the party. Becoming bourgeoisie in all but name, which further demoralized and harmed the economy, as well as increasing the economic disparities and inequalities between the socialist republics, breeding discontent and resentment within the population.

Furthermore he got the Soviet Union involved in a war in Afghanistan, which not cost the USSR precious manpower and raw material, but only contributed to the continued demoralization of the citizenry.

But perhaps Brezhnev biggest mistake was that rather than implementing market reforms akin to China after Mao through the selective privatization of certain sectors of the economy and laxed investment policies to encourage capital investment, smaller-industry competitivity, and the development of a service-sector economy in compliance with state guidelines to keep up with demand, accumulate greater wealth acquisition, and ensure a smooth transition from an industrial manufacturing economy to a post-industrial economy. Instead Brezhnev fell back on old conservative soviet policies, which placed a heavy emphasis on the USSR remaining as an industrial manufacturing hub and resource exporter, even as the manufacturing was already on the decline. Even as most of the developed world was already making the transition between an industrial to post-industrial economy and a new black market begun to emerge.

Worker productivity declined, alcohol addiction rates soared, and depression and suicides jumped, all of which hampered the growth of the Soviet Economy.

And because the economy was centered around the top, the effects it had on them would affect the rest of the country, as when Nixon got rid of the Gold standard for which the international trading system was initially built upon, instead replaced by an international fiat currency system, the USSR struggled to have enough gold reserves to catch up and struggled to transition into fiat currency(Pg. 73–74 Sibony). Additionally, declining oil prices and increased competition from other oil-producing nations made oil exporting less profitable, destroying the energy exporting sector of the economy and decreasing the quality of life within the USSR more, leading to more deficits.

(So Nixon held more responsibility for the fall of the Soviets than Reagan)

This was the Soviet Union that Mikhail Gorbachev inherited when he came to power. He sought to figure out a way to re-vitalize the Soviet Economy through pressuring a series of ambitious reforms, yet these reforms are what proved to be the final fatal blow to the Soviet Union. As Gorbachev went in the extreme opposite of Brezhnev in that he begun to rapidly privatize and open the Soviet Economy to free-enterprise(against the advice of his consultants) under Perestroika, which not only further de-stabilized the economy but had lead to the creation of dozens of oligarchs which seized total control over their respective sectors of their economies, causing chronic shortages of essential goods to maintain the public infrastructure. Additionally with Glasnost there came a flood of new media that came pouring in from the west, which showed off the glamourous life-styles of their western counters-parts, which proved more attractive than the hell they were living in, so they begun to increasingly revolt against the system. Along with greater freedoms for the press and transparency with the International community and domestic population, allowed the citizens to bare witness to the horrors of disasters such as Chernobyl, which only went to further highlight the incompetence of the government on full display. Finally by 1991, despite attempts to preserving the Union, the USSR was effectively dissolved and became 15 separate republics. All of which would struggle to transition well into the 21st century to participate in a global liberal market economy, when they’ve been so used to the security brought by the prior Soviet Governments. GDP decreased and quality of life diminished further, as the next few decades proved very difficult for the former socialist republics, especially Russia-the largest of them-to handle effectively. Gorbachev’s reforms weren’t responsible for the unions stagnation, but it was certainly responsible for being the final nail in it’s rotten coffin.

Here’s my conclusion…

Whilst the USSR had amidst potential and clearly displayed itself as an effective rival to the capitalist United States, it’s GDP could never totally match it’s counter-part, due to a variety of factors that is inherit within the contradictions of the vanguard-guided economy of the Soviet Union.

• The Soviet Union government placed more emphasis on party favoritism and personal growth over the well-being of the citizenry.
• The command economies inability to effectively liberalize and develop a service-sector that could compete with the west, still heavily relying on a stagnate manufacturing-heavy, commodity-exporting economy, unable to transform into a post-industrial economy.
• The removal of the bureaucratic safeguards put in place by Stalin, allowed corruption to run rampant, social mobility stagnates killing incentives to work, and a black market formed to undermine the economic system.
• The decay of the social cohesion of the Soviet Union along with a lack of a coherent national identity due to some groups having more privilege's than others lead to growing resentment and kindling of nationalist fervor which negatively effected stability within the USSR.
• The lose of good will from it’s allies(like China) or the massive trade deficits it garnered from other socialist states like Cuba greatly off-set the budget and upset the export economy.
• It’s inability to get off the international Gold standard and withstand the drastic drops in the pricing of oil and gas.
• It’s wasteful spending on military research, development, and production to keep pace with its rival states, forced the Government to take precious funds away from other sectors of the economy such as healthcare, leading to a gradual decrease in the quality of life.
• The losses incurred from the world wars and Russian Civil War severely impacted and set back Soviet development.
• It transitioned into a Market Economy too quickly without proper consideration on the effects it could bring, further destabilizing the state.

All of this goes to show how not to properly handle a top-down central economy. Now to Capitalists, this may seem like all like a damning argument against socialism, which is certainly not the case I am making, in areas where socialism(in some form or another) was implemented properly either through parliamentary reforms like in the Nordic countries or, the careful liberalization of the economy by post-Mao China, or the success stories of the pink-tide governments in Latin America, or the remarkable self-sufficiency and resilience of Cuba it worked well all things considered. It’s just that due to the unique political mechanisms in which governed the Soviet Union since it’s inception, allowed for the manifestation of these contradictions to be set in place that ushered in it’s complete collapse. It’s not the fault of socialism as an economic system, it’s the fault of the Marxist-Leninist vanguard political system, where the party and the state were considered inseparable. However for Marxists, I want to re-affirm that this is not a glowing endorsement of the USSR either, it’s a critical examination of the flaws and successes of the Soviet political economy and while personally I don’t like the Soviet Union. I can appreciate it to an extent for what it was trying to be and what it desired to accomplish. The end goal was noble but as they say the road to hell is often paved with good intentions, and nowhere is that more true than the USSR.

I feel like as socialists, we ought to learn from our past mistakes and figure out from there on how we can implement a system that could effectively overthrow Capitalism. I value learning from the past. But what annoys me is how many Marxists online still cling to the Soviet Model as the pinnacle of socialism, which if you’ve learned anything by now, know is not the case. This clinging on to a past that has never existed except in their playful imaginations must come to an end, we must learn and move on and find a new shining path towards socialism, then eventually communism. It’s why I created post-material communism as an ideology in the first place, it’s meant to serve as a more modern bridge to achieve socialism and unite various elements of the left into a coherent front to face capitalism down. It’s time we stop praising old dead failed states and start to actually try to implement the ideal society we wish to achieve. A socialism of the 21st century.

I hope you all have a wonderful day comrades! Have a happy pride month!

(It took me 3 days to write this post, I hope you guys enjoyed reading it all the way through!)

Footnotes