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

Industrial and
Agricultural Change
in the USSR, 1917 1991
Gorbachev to
Yeltsin
How important were
economic weaknesses in
bringing about the collapse
of the USSR?
 The
soviet government could justify its
success by meeting the needs of the
people.
 This is even more important when the use
of terror was removed in 1953
 When the soviet economy cannot
provide the people with what they need,
people start to question the government!
Novosibirsk Report (1983)
‘For internal use only’
 Reported

a 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 – ndedn with dismantling
Soviet economic system
 Result – economy in chaos and disruption
 Economy became weak and vulnerable
Initial reforms: discipline &
acceleration

Position Like-minded reformers brought into
Politburo


Yegor Ligachev
Nikolai Ryzhkov

Grigory Romanov dismissed (main rival)

Promoted reformers to Central Committee in 1986



Boris Yeltsin
Alexander Yakovlev
This meant he could now launch reforms without
opposition
Initial reforms (discipline)

Tackling the Problem of Alcohol




Wanted to improve health of Soviet population and improve
productivity
By mid-1980s alcohol 15% of household spending
Gorbachev – April 1985 – ‘We can’t build Communism on
vodka’
Reforms:
Legal age – 21
Reduced number of retail outlets
Vineyards destroyed
Distilleries closed
Cost of vodka shots tripled
1.
2.
3.
4.
5.

Results:


Benefits at first
But later



Tax revenues fell – shortfall in budget
Drinking levels rose anyway – moonshine
Clear that relying on the workforce to become sober was not a
solution
Twelfth Five-Year Plan
1.
2.
3.
4.
more on traditional Soviet method of
increasing investment,
controlled by central planning - greater
production.
this would accelerate growth in the
economy.
mostly invest in science, research and
especially in engineering.
Weaknesses of Twelfth FiveYear Plan
1.
2.
3.
4.
5.
6.
7.
8.
9.
Investment skewed towards construction
Out of date equipment
Slow to use new technology
Agricultural sector expensive to run
Focus on quantity not quality
Opposition to Change
Superministeries created
Resistance from military
War in Afghanistan
Weaknesses of Twelfth FiveYear Plan
1.
Investment skewed towards construction


2.
Out of date equipment


3.
Broke down often
unproductive
Slow to use new technology

4.
Led to extra spending – to equip factories
constructed
Overspends
Imports expensive (needed foreign exchange
– needed for food)
Agricultural sector expensive to run

Not much to be gained
Weaknesses of Twelfth FiveYear Plan

Focus on quantity not quality



Opposition to Change



Emphasis on meeting numerical targets
Quality so poor – unusable products
Within Party and planning apparatus
June 1986 – Gorbachev – «Take Gosplan… What
they want, they do.’
‘superministries’ created


Not ‘decentralise’
To better 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 to 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 deficit 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. (Glasnost reforms)
 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, 1987


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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/m
cdonalds-moscow-closure-russia-martin-parr
https://www.youtube.com/watch?v=0jSywAd7x
RU
One of the first customers
Reforms under Perestroika

Law on State Enterprises, 1987
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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, 1988
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Small-scale businesses established
Could set their own prices
Flourishing sector in Cafés, restaurants and small
shops
Disguised to conservative elements by using
word ‘co-operatives’
Impact of Perestroika

Food Production
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

Enterprises under state interference

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Decided on allocation of materials
Idea of transferring some power to managers depended
on state bureacrats – often kept tight controls
Products diverted to co-operatives from state shops
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

small growth, still not enough (1% - 2% 1986-1987)
One-fifth of food imported
Charged highe price = Inflation and shortages in state
shops
Pensioners and those on fixed income – most affected
Co-operatives shopping around for buyer who could
pay more


Deals with richer city authorities
Poorer cities – lack of food and basic products
Impact of Perestroika

Co-operatives more productive than state sector


Attracted corrupt government officials – wanted bribes
to continue to operate
Criminal gangs – extortion rackets
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Uncertainty over supplies
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Urban wages: 1988 – rose 9%, 1989 rose 13%
Lack of foreign investment
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Wave of hoarding
Food rationing – 1988 – meat rationed in 26 of 55 regions
in Russia
Principle of electing managers = wage increases


Powerful after selling illegal alcohol
Too much bureacracy
End of 1990 – almost 3,000 joint ventures – most smallscale – little impact on economy
Reforms undermined by officials


Ignored, Sabotaged
Leningrad – city administration - withdrew all sausages
and buried them
Falling Price of Oil
 Made
situation worse
 Reliant on oil exports as source of foreign
exchange
 By 1984 – oil an gas 54% of Soviet exports
By 1989, problems reaching
crisis point!!



Reforms weakened state planning with no
replacement
Massive debt
Improvement in consumer goods – not
achieved


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


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Reforms made it worse
The only solution...
 Dismantling
system!
the whole soviet economic
‘State Commission of
Economic Reform’
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
July 1989, issued a report that concluded a n^more radical
reform was needed – move to a market-led economy!
Split Politburo

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Gorbechev hesitated
By October – Stanislav Shatalin – 500 Days Programme

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Reformers – wanted to implement reccommendations quickly
Others (like Rhyzkov) – wanted gradual transition
Reccommended rapid move to market economy
Rejected by Soviet government – accepted by Russian Parliament
Division between central Party leadership and national
republics in USSR –



Caused 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
Activity Knowledge Check
 Page
120.