Failure of Economic Reforms Flashcards
(29 cards)
What were the fundamental flaws of the Soviet economy?
- No incentives for hard work or innovation - Small rich-poor gap reduced incentive - Low labour productivity vs. West
Why did the centralised nature of the Soviet economy make it so inefficient?
- Moscow admins couldn’t coordinate effectively - Wrong fertilisers delivered - Wrong materials to factories - Centralisation limited production
What problems existed within agriculture?
- Lacked modern machinery - Needed more labour than West (25% vs. 4% in US) - Outdated transport - Grain rotted due to poor storage
What problems existed within Industry?
- Gosplan set quantity over quality targets - 12% of machinery went unused, causing waste
How did military expenditure impact the Soviet economy?
- 17% of GDP on defence by 1985 - Starved other sectors of needed funds
What was the aim of Gorbachev’s economic policy?
To address the problems with the Soviet economy
Perestroika
Restructuring
What were the 3 stages of Perestroika?
Rationalisation, Reform, Transformation
What was the Rationalisation stage of Perestroika?
- 1985–86 - Aimed to modernise economy and increase production - Didn’t alter fundamental system
What was the Reform stage of Perestroika?
- 1987–1990 - Introduced market elements into command economy - Aimed to blend socialism and capitalism
What was the Transformation stage of Perestroika?
- 1990–1991 - Abandoned command economy - Tried to create a full market economy
What were the consequences of the continuation of the anti-alcohol campaign?
- Alcohol production cut 50% - Rise in illegal alcohol - Revenues dropped by 67m roubles (9% GDP) - Campaign abandoned in 1988
How did oil prices affect the Soviet economy?
- Oil revenues fell 40% as prices dropped from $70 to $20 (1981–85)
Uskorenie
Acceleration – investment programme to modernise economy (1985–86)
Why did Uskorenie (acceleration) fail?
- Funded by Western loans, debt rose $9bn by 1988, causing inflation - Gorbachev misallocated investment to energy
What was the Law on Individual Economic Activity of Nov. 1986?
Legalised small-scale private work like tutoring and maintenance
What was the Law on State Enterprises 1987?
Devolved power to factory managers to set prices
Why did the Law on State Enterprise fail?
- Gosplan kept control - Higher prices increased government debt
What was the Law on Co-Operatives 1988?
- Legalised large private businesses - By 1990, 200,000 private companies set up
How was the Law on Co-Operatives successful?
- Turnover rose from 29.2m to 1.04bn roubles - Incomes 2–3x higher than state workers
What problems were created by Gorbachev’s market reforms?
- Undermined planning but didn’t replace it - Free market prices much higher - Severe shortages of essentials
What were the political consequences of Gorbachev’s reforms?
- Price rises caused public dissatisfaction - Strikes increased - Boosted nationalist calls to dissolve USSR
What was Gorbachev’s economic approach by 1990?
He abandoned the command economy and aimed for a market economy
What was the 500 day programme?
- 1990 plan by economists for rapid marketisation and privatisation - Backed by Gorbachev and Yeltsin
