Introduction

• Opportunity cost – the benefits of the foregone (next best) alternative

A Journey of Choices

The Economic Demise of the Soviet Union

ChoosingChoosingIsIs

RefusingRefusing

• 3% literacy• serfdom• just beginning to

industrialize• Wealth held by

Romanovs

1917

1921: New Economic Policy (NEP)

farmers’ market

“We are taking one step backward in order to take two steps forward.”

Results: Five Year Plan, 1928-33

Benefits:

• Urban electrification• New towns, factories, mines• Growth outpaced West

(Great Depression)– 48% increase in GDP

1928-33– 113% increase in producer

goods output– 227% increase in electricity

Burden on consumer:

• Slow growth in consumer goods – increase of 1%– food rather than other consumer

goods

• Livestock production fell 8%

Step 1: “de-kulakization”

"Endless fields of people - women, children, old people - and universal wailing. They were being loaded on to cattle trucks to be sent off to Siberia. I was there for fifteen minutes and I asked the station master there, ' What's this? What's happening here?' and he said, ' What's up with you? Have you just landed from the moon or maybe you've just arrived from Persia? This is the collectivisation and the elimination of the kulaks as a class.' And it turned out there were so many people, and not enough trains that, with the cold weather, people were literally just dying there .”

https://whewert.wikispaces.com/5-Focus+3

A parade under the banners "We will liquidate the kulaks as a class" and "All to the struggle against the wreckers of agriculture.“

http://www.yale.edu/annals/siegelbaum/images/

siegelbaum_photos.htm

The Economic Demise of the Soviet Union

Nazis Invaded USSR, June 1941 . . .

and . .

.

. . . lost the war

German POWs in Moscow

USSR: world power

Choice: nuclear weapons program

“Lightning 1”

1st Soviet atomic bomb test1949

“Joe 1”1st

Soviet atomic bomb

Choice: education

1950s - “Golden Years” of the Soviet Economy

The Economic Demise of the Soviet Union

SOURCE: Ofer, 1987; Laurie Kurtzweg, “Trends in Soviet Gross National Product” in United States Congress, Joint Economic Committee.Gorbachev’s Economic Plans, Vol. 1, Washington D.C., pp. 126–165; James Noren and Laurie Kurtzweg, “The Soviet Economy Unravels:1985–91” in United States Congress, Joint Economic Committee. The Former Soviet Union in Transition, Vol. 1, Washington D.C. pp. 8–33,1993; Angus Maddison. Monitoring the World Economy 1820–1992, OECD, Paris, 1995; Angus Maddison, The World Economy : A MillennialPerspective, OECD, Paris, 2000.

Period Avg annual % growth GDP

1940-50 2.2

1950-60 5.2

1960-70 4.9

1970-80 2.5

1980-85 1.8

1986-90 1.3

The Economic Demise of the Soviet Union

“Thaw” in the Cold War

Khrushchev’s U.S. tour

Yale University Choir in Red Square after Lacy

Zarubin Agreem

ent

The Economic Demise of the Soviet Union

•called for return to Leninist ideals• begins the “de-Stalinization” of the USSR

•Denunciation of Stalin’s military and party purges•Note: did not denounce coercion of populace used to advance the interests of the party and the state

the “Secret Speech” - 1956“On the Cult of Personality

and Its Consequences”

Twentieth Congress of

the Communist Party of the

USSR

Leonid Brezhnev: 1964 - 1982

The Economic Demise of the Soviet Union

“Good Ol’ Boy” Communism

The Economic Demise of the Soviet Union

Brezhnev opened the

Olympic Games in Moscow, 1980 to showcase the Soviet Union to

the world

Brezhnev years characterized by

emphasis on image and Soviet prowess on the world stage,

while ignoring serious underlying problems

in the Soviet economy

Behavior encouraged by Output Target Incentives:

• Characteristics of Factory Directors:– anti-innovation– risk-averse– hoarder– defend status quo– understate capacity– overstate (ratchet)

resource needs

The Economic Demise of the Soviet Union

tolkachi – procurers of production supplies by trading with other factories hoarding misallocated supplies, or through the black market.

no bridge from invention to innovation

• Invention:

new knowledge or ideas

• Innovation:

application of knowledge to production

BZ1-C Redline C-Core Baseball Bats                                       The world's best baseball bat: patented Carbon Core technology combines   Easton's exclusive Sc500 Scandium alloy walls, the strongest in the game, with   carbon graphite reinforcement, resulting in the thinnest walls ever without sacrificing   durability.     Extended barrel for maximum hitting area.   Alloy: Sc500/graphite 

• Invention:

scandium alloy

Scandium alloys were first made commercially available in 1996 by the Ashurst Technology Group. Easton Sports first used Scandium alloys in February 1997, the product was the Redline C-Core bat. http://www.precisiontandems.com/eastonscandium.htm

• Innovation:baseball batsbicycle frames

no bridge from invention to innovation

The Economic Demise of the Soviet Union

The Economic Demise of the Soviet Union

End of the Brezhnev Era

Konstantin ChernenkoFebruary 1984 – March, 1985

Yuri AndropovNovember 1982 – February 1984

The Economic Demise of the Soviet Union

Mikhail Gorbachev 1985-1991

The Economic Demise of the Soviet Union

The Demise of the Soviet Union - 1991

• Reagan’s presidency• Afghanistan• Chernobyl

Major blows to citizen support of the Soviet

regime:

Reagan: On-going Challenge

The Economic Demise of the Soviet Union

 “The Soviet Union is an Evil Empire, and Soviet communism is the focus of evil in the modern world”

March 8, 1983

Strategic Defense Initiative (“Star Wars”)

Afghanistan: Dec. 1979 – Feb. 1989

The Economic Demise of the Soviet Union

Soviet casualties:Killed: 15,000Wounded: 30,000# Served: 600,000Avg Troop strength: 100,000

Chernobyl Nuclear Accident: April 26, 1986

The Economic Demise of the Soviet Union Message: they don’t

care about us

The Economic Demise of the Soviet Union

Gorbachev’s Reforms: Glasnost & Perestroika

Glasnost

• political “opening”– allowed dissent– ended party monopoly of

elected regional & local offices– greater regional representation– encouraged social research– admitted social problems

Solzhenitsyn in

gulag, 1953

despite Gorbachev’

s invitation, Solzhenitsy

n didn’t return to

Russia until 1994, 20 years

after being exiled

The Economic Demise of the Soviet Union

Gorbachev’s Reforms: Perestroika

Perestroika• economic “restructuring”

– allowed some private (cooperative) business

– some decentralization of control over state production

Russian Dissident & Chess Champion Wins Human Rights Award

Garry Kasparov to Receive UN Watch Prize 

at League of Nations Hall in Geneva (April 2013)

“Gorbachev had as much to do with the fall of the Soviet Union as Louis the XVI had to do with the French Revolution.”

The Economic Demise of the Soviet Union

August, 1991

Boris Yeltsin declares Russia’s independence from the USSR

1940 Katyn Forrest Massacre

The Economic Demise of the Soviet Union

”I was dumb; I believed it all.

I would have given my life for the Motherland.” *

*Lenin’s Tomb by David Remnick