Transcript 4. Gorbachev to Yeltsin. Industrial and Agricultural Change File

Industrial and
Agricultural Change
in the USSR, 1917 1991
Gorbachev to Yeltsin
Novosibirsk Report (1983)
‘For internal use only’
• Crisis in agriculture (growing)
• Caused by state inefficiency and inflexibility
• Ignored or misunderstood by older members of Politburo
Gorbachev tried to introduce
reforms
• Trial and error – dismantling Soviet economic system
• Result – economy in chaos and disruption
• Economy became weak and vulnerable
Initial reforms (discipline)
• Changes to Politburo and Central Committee
• Like-minded reformers brought into Politburo
• Yegor Ligachev
• Nikolai Ryzhkov
• Promoted reformers to Central Committee in 1986
• Boris Yeltsin
• Alexander Yakovlev
• Grigory Romanov dismissed (main rival)
Initial reforms (discipline)
• Changes to Politburo and Central Committee
• Success?
• Yes. Meant he could now launch reforms without opposition
Initial reforms (discipline)
• Tackling the Problem of Alcohol
• Problems
• Wanted to improve health of Soviet population and improve
productivity
• By mid-1980s
• Alcohol 15% spending
• Partly because of lack of other goods
• Gorbachev – April 1985
• ‘We can’t build Communism on vodka’
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Legal age – 21
Reduced number of retail outlets
Vineyards destroyed
Distilleries closed
Cost of vodka shots tripled
Initial reforms (discipline)
• Success or not?
• Benefits at first
• Later
• Tax revenues fell – shortfall in budget
• Drinking levels rose anyway – moonshine
• Clear – not solution
Twelfth Five-Year Plan
The government decided to focus more on traditional Soviet
method of increasing investment, controlled by central planning,
to push economy to greater production. The plan was that this
would accelerate growth in the economy. They would mostly
invest in science, research and especially in engineering.
Weaknesses of Twelfth FiveYear Plan
• Investment skewed towards construction
• Led to extra spending – to equip factories constructed
• Overspends
• Out of date equipment
• Broke down often
• unproductive
• Slow to use new technology
• Imports expensive (needed foreign exchange – needed for food)
• Agricultural sector expensive
• Not much to be gained
Weaknesses of Twelfth FiveYear Plan
• Focus on quantity not quality
• Emphasis on meeting numerical targets
• Quality so poor – unusable products
• Opposition to Change
• Within Party and planning apparatus
• June 1986 – Gorbachev – «Take Gosplan… What they want, they
do.’
• ‘superministries’ created
• Not ‘decentralise’
• Co-ordinate economic activity and reduce waste
• Could not make those changes
• Reforms implemented by people whose positions are being
reduced
Weaknesses of Twelfth FiveYear Plan
• Resistance from military
• Changes to investment priorities
• Wanted new investment in military technology
• War in Afghanistan
• Expensive
• Also increased defence spending to combat USA’ Strategic
Defence Initiative
• Between 1985 and 1986, the defecit of the Soviet economy rose
from 2.4% per of GDP to 6.2%.
Economic Perestroika
• By 1987, Gorbachev realised they needed to restructure the
Soviet economy. The state was obstructing reform, so they
needed to use other methods outside the state. He wanted to
introduce market mechanisms and allow private enterprise.
They would set up incentives to encourage productivity and
give more flexibility than the command economy.
Reforms under Perestroika
• Encourage Joint Ventures
• Foreign firms could establish businesses (normally joint
enterprise with state)
• 1990 – Moscow – McDonald’s
• Hope that these would bring new technology
• http://calvertjournal.com/articles/show/3046/mcdonaldsmoscow-closure-russia-martin-parr
• https://www.youtube.com/watch?v=0jSywAd7xRU
One of the first customers
Reforms under Perestroika
• Law on State Enterprises
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Less control on wages and prices
Weakened Gosplan
Could choose managers
Factories could produce what they wanted once government
targets met
• Co-operatives Legalised
• Small-scale businesses set prices
• Flourishing sector
• Cafés, restaurants and small shops
• Disguised by using word ‘co-operatives’
Impact of Perestroika
• Food Production – mostly negative (not enough)
• Small increase in growth rate – 1% - 2% 1986-1987
• Still not adequate
• One-fifth of food imported
• Enterprises under state interference - negative
• Decided on allocation of materials
• Idea of transferring some power to managers depended on state
bureacrats – often kept tight controls
• Products to co-operatives not state shops - negative
• Charged highe price
• Inflation and shortages in state shops
• Pensioners and those on fixed income – most affected
Impact of Perestroika
• Co-operatives shopping around - negative
• For buyer who could pay more
• Deals with richer city authorities
• Poorer cities – lack of food and basic products
• Co-operatives more productive than state sector - negative
• Attracted corrupt government officials – wanted bribes to
continue to operate
• Criminal gangs – extortion rackets
• Powerful after selling illegal alcohol
• Uncertainty over supplies - negative
• Hoarding
• Food rationing – 1988 – meat rationed in 26 of 55 regions in
Russia
Impact of Perestroika
• Principle of electing managers – wage increases - negative
• Steep rise in wages
• Urban wages
• 1988 – rose 9%, 13% in 1989
• Lack of foreign investment - negative
• Too much bureacracy
• End of 1990 – almost 3,000 joint ventures – most small-scale –
little impact on economy
• Reforms undermined by officials – negative
• Ignored
• Sabotaged
• Leningrad – city administration - withdrew all sausages and
buried them
Falling Price of Oil
• Worse
• Reliant on oil exports as source of foreign exchange
• By 1984 – oil an gas 54% of Soviet exports
By 1989, problems causing
dismantling of Soviet system
• Massive debt
• Improvement in consumer goods – not achieved
• Reforms made it worse
• Strikes increased
• Workers in Don Basin – protested over unpaid wages and food
shortages
• Government’s response – quickly increase wages (short-term
measure)
• No point having more money if shops empty
• Gorbechev undermined – failed to fix problems
‘State of Economic Reform’ –
radical solution needed
• Split Politburo
• Reformers – wanted to implement reccommendations quickly
• Others (like Rhyzkov) – wanted gradual transition
• Gorbechev hesitated
• By October – Stanislav Shatalin – 500 Days Programme
• Reccommended rapid move to market economy
• Rejected by Soviet government – accepted by Russian Parliament
• Division between central Party leadership and national
republics in USSR – chaos – economy collapsed
• 1990 – 1991 – output down by one-fifth
• Perestroika led to catastroika
Interpret Gorbachev’s attempts
at reform
• Historians in the West
• Liberal free-market best way to achieve economic growth and
supplying population
• Communism inherantly weak – failure not surprising
• Historians on the political left
• View reforms more positively
• Weakness not insurmountable – many bad governments had held
onto power in economic decline
• Economic collapse did not have to mean collapse of Soviet Union
Interpret Gorbachev’s attempts
at reform
• Historians who focus on context within which Gorbachev was
acting
• He did face unfavourable international climate
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War in Afghanistan
Falling oil prices
US embargo on imports of technology to USSR
Collapse of communist regimes in Eastern Europe during 1989