• Embed Doc
  • Copy Link
  • Readcast
  • Collections
  • CommentGo Back
 
In the summer of 2002, after the Russian govern-ment introduced the flat income tax, completedfiscal reforms, created the Stabilization Fund, andintroduced land reform in Russia, I had a premo-nition that the window of opportunity for furtherreforms would be closing for a number of years. Iwas correct in my prediction.As a result, I decided to turn to more academicpursuits. The title of my latest book, which I wouldlike to discuss today, can be translated as
The Col-lapse of an Empire: Lessons for Modern Russia
.
1
Itrelates the story of the last few years of the SovietUnion. But when I wrote about the collapse of theSoviet Union, I also had in mind dilemmas of con-temporary Russia.There were several factors which pushed me towrite this book. The first was the rise in oil prices,which in real terms have started to approach thelevel of the late Brezhnev period. The second wasthe disturbing tendency to mythologize the lateSoviet period in current Russian society andpopular culture. These myths include the belief that, despite its problems, the Soviet Union was adynamically developing world superpower untilusurpers initiated disastrous reforms. At least 80percent of Russians are convinced of this flawedinterpretation of history.Historically, such myths have a dangerousprecedent—namely, Germany between WorldWar I and World War II. Then, the legend wentthat Germany was never defeated in the war, but“stabbed in the back” by the Jews and the Social-ists. To some degree, the responsible party was thedemocratic German government, as it was unpre-pared to publish materials about what really hap-pened before and after World War I.Similarly, access to documents about theSoviet collapse is becoming increasingly restricted,but we were still able to make public a number of them that can properly explain what happened toour country.To be frank, I never thought that the book—half of which is tables, graphs, or official materialsof the Soviet government—could be a bestsellerin my country. Yet it is, a fact which provides aglimmer of hope.
The Story of Grain
In a simplified way, the story of the collapse of the Soviet Union could be told as a story aboutgrain and oil. As for the grain, the turning pointthat decided the fate of the Soviet Union began
1150 Seventeenth Street, N.W., Washington, D.C. 20036202.862.5800www.aei.org
   O  n  t   h  e   I  s  s  u  e  s
The Soviet Collapse: Grain and Oil
By Yegor Gaidar
Yegor Gaidar is director of the Institute for Economies in Transition in Moscow. Between 1991 and 1994,he was acting prime minister of Russia, minister of economy, and first deputy prime minister. Between1993 and 2003, Gaidar was a founder and a co-chairman of the Russia’s Choice and the Union of RightistForces Parties, and a deputy of the State Duma. His most recent book,
Gibel’ Imperii:
Uroki dlyasovremennoi Rossii
[The Collapse of an Empire: Lessons for Modern Russia], was published in 2006.The English translation of the book will be published by the Brookings Institution Press on July 30, 2007.
Research assistant Igor Khrestin compiled this textfrom the transcript and the video recording of thelecture delivered by Yegor Gaidar at AEI on Novem-ber 13, 2006, and translated the conclusion of thisarticle from Russian. The text was edited by residentscholar Leon Aron and augmented by Mr. Gaidar.
 April 2007
 
with the economic debate of 1928–29, when the dis-cussion centered on what would later be called the“Chinese path” of development. (By several importanteconomic and social indicators, the Soviet Union of that period and China in the late 1970s took similarapproaches to reform. See figure 1.) At the time, thehead of the Soviet government, Aleksei Rykov, andthe chief ideologist of the Communist Party, NikolaiBukharin, earnestly defended the idea of a path whichincluded preserving private agriculture and the market,and ensuring financial stability—but holding onto theparty’s political control.The Soviet leadership ultimately chose another path.The solution preferred by Joseph Stalin was the expropria-tion of peasants’ property, forced collectivization, andextraction of grain. Judging from the available documents,the essence of this decision was relatively simple. Bukharinand Rykov essentially told Stalin: “In a peasant country, itis impossible to extract grain by force. There will be civilwar.” Stalin answered, “I will do it nonetheless.”The result of the disastrous agriculture policy imple-mented between the late 1920s and the early 1950s wasthe sharpest fall of productivity experienced by a majorcountry in the twentieth century. The key problemconfronting the Soviet Union was well-expressed inthe letter sent by Nikita Khrushchev to his colleaguesin the leadership of the party. The letter fundamentallystated: “In the last fifteen years, we have not increasedthe collection of grain. Mean-while, we are experiencinga radical increase of urban popu-lation. How can we resolve thisproblem?”Once again, a serious discus-sion ensued among Soviet leadersin the early 1950s, resulting intwo positions. The first positionwas to attempt to improve thesituation in the agriculturalregions outside of the fertile“black soil belt” in southern Rus-sia. The other position was toresolve the problem by utilizingthe socialist planning system:large projects and a concentrationof resources. Naturally, doubts lin-gered about whether this strategywould cause even higher fluctua-tions in long-term production.But these considerations were ignored and, tacti-cally, the strategy of dramatically expanding the landunder cultivation yielded temporary success. Betweenthe mid-1950s and the early 1960s, the amount of thegrain produced by the Soviet Union increased signifi-cantly. The problem was the limited amount of suitableland and the continuing growth of the population inlarge cities. Thus, already in the late 1960s, the short-comings of this plan were evident.In 1963, Nikita Khrushchev sent a letter to the leadersof the Socialist bloc, informing them that the SovietUnion would no longer be able to supply them with grain.That year, the Soviet state bought 12 million tons of grain—and spent one third of the country’s gold reservesto do so. Khrushchev commented: “Soviet power cannottolerate any more the shame that we had to endure.”
2
Therefore, in the 1960s, state production of grain sta-bilized and, regardless of attempts by the Soviet leader-ship, remained fixed at 65 million tons per year until thelate 1980s (see figure 2). The cities, however, continuedto grow. What policy could succeed if a country had noincrease in grain production and an 80 million–personincrease in its urban population?The picture was bleak. Russia, which before WorldWar I was the biggest grain exporter—significantly largerthan the United States and Canada—started to be thebiggest world
importer
of grain, more so than Japan andChina combined.
- 2-
F
IGURE
1
C
OMPARISON BETWEEN
USSR
IN
1930
AND
C
HINA IN
1980,
BY
GDP P
ER
C
APITA AND BY
L
EVEL OF
U
RBANIZATION
N
OTES
:All figures are taken in part from Yegor Gaidar,
Gibel’ imperii: Uroki dlya sovremennoi Rossii
[TheCollapse of an Empire: Lessons for Modern Russia] (Moscow: Rossiyskaya Politicheskaya Entsiklopedia,2006), and presented at a lecture by Gaidar at the American Enterprise Institute on November 13, 2006.More information and all figures can be located in full at www.aei.org/event1420/.* In international dollars of 1990 (Geary-Khamis dollars)
02004006008001000120014001600
USSR, 1930China, 1980
05101520
USSR, 1930China, 1980
   U  r   b  a  n  p  o  p  u   l  a   t   i  o  n ,   %
   G   D   P  p  e  r  c  a  p   i   t  a ,   $   *
 
Soviet imports had to be paid for in hard currency.Mikhail Gorbachev was quite frank in one of the meet-ings of the Communist Party of the Soviet Union(CPSU): “We are buying [the grain] because we cannotsurvive without it.”
3
There were, of course, examples of nations, such as Japan, that also massively imported grainand other agricultural products. Unlike the Soviet Union,however, these nations were able to export products fromtheir machine-building and processing industries.Why could the Soviet Union not pursue the samepolicy? Because “socialist industrialization” had resultedin the Soviet industry being unable to sell any processed(value-added) products. Nikolai Ryzhkov, chairman of the USSR Council of Ministers, expressed the sentimentclearly at another meeting of the Sovietleadership: “No one will take our machin-ery production. That is why we are export-ing mainly raw materials.”
4
The Story of Oil
The Soviet economy thus hinged onits ability to produce and export rawcommodities—namely, oil and gas. TheSoviet leadership was extremely fortunate:at almost exactly the time when seriousproblems with the import of grain emerged,rich oil fields were discovered in the Tyu-men region of Western Siberia.Already in 1970, Western Siberia wasconsidered a large oil region by interna-tional standards. During the next twelveyears, the Soviet Union increased oil pro-duction there twelvefold. There wasintensive debate among the Soviet leader-ship about how to best exploit the West-ern Siberian oil. The oil industry expertswarned the CPSU leadership and govern-ment State Planning Committee that itwould be impossible to increase the pro-duction at such a rapid pace in the futurewithout facing serious technical problems.Yet the Soviet leadership told the oilministry there was no other choice. TheSoviet premier, Aleksey Kosygin, used tocall the chief of the Tyumenneftegaz, Vik-tor Muravlenko, and explain the despera-tion of the situation:
“Dai tri milliona tonsverkh plana. S khlebushkom sovsem plokho”
[Please give three million tons above the planning level.The situation with the bread is awful].
The “Spanish” Curse
By 1975, the Soviet Union began having serious prob-lems with the output of new oil wells: much higherinvestment was needed for the current operations to getthe same output (see figure 3).But the Soviet Unionwas fortunate to get unusually high oil prices starting inthe mid-1970s.The oil market is peculiar because of the varyinglevels of elasticity of the demand and supply in both theshort and the long terms. The fluctuations of prices are
- 3-
F
IGURE
2
P
ROCUREMENT OF
G
RAIN IN THE
USSR
010203040506070
1966–69 1980–85 1986–90
   P  r  o  c  u  r  e  m  e  n   t  o   f  g  r  a   i  n   i  n   t   h  e   U   S   S   R
F
IGURE
3
A
VERAGE
O
UTPUT OF
N
EW
O
IL
W
ELLS
B
EING
P
UT IN
O
PERATIONIN THE
USSR
0200400600800100012001400160018002000
1975 1980 1985 1988 1989 1990
of 00

Leave a Comment

You must be to leave a comment.
Submit
Characters: ...
You must be to leave a comment.
Submit
Characters: ...