CHAPTER 3

IMPLICATIONS OF THE COLLAPSE OF USSR

Collapse of the USSR has had major economic, political, and social implications for its
former members and the rest of the world.  Collapse of the Soviet Union has been widely
interpreted as the victory of capitalism over communism, in the battle between the two
contrasting economic and ideological viewpoints in academic and practical levels.

However, recent global economic and financial crisis of 2007 – 2009 has cast significant
level of doubt on the levels of effectiveness of capitalism market economy on its pure form as
well. In other words, one of the key reasons of the recent global economic recession has been
specified as lack or absence of government intervention in economic processes in the US that
enabled the pursuit of profit maximization by financial institutions in the US in irresponsible
manners. The crisis has shed a light on substantial disadvantages of capitalism, and this fact
has direct implications on still continuing communism versus capitalism debate.

Moreover, economic implications of the collapse of the Soviet Union in the global scale
relates to creation of new markets for developed countries. After the collapse of the USSR all
former members of the blog have decided change their economic system to the market
economy of supply and demand, although there were substantial differences amongst newly
independent states in terms of the manner in which market economy needed to be
implemented.
For example, top economists in Russia had chosen the strategy of ‘shock therapy’ transfer to
the market economy that involved extensive privatization of public goods and transfer to the
market economy during the shortest period of time. Other former members of USSR such as
Kazakhstan, Turkmenistan and Uzbekistan, on the other hand, selected the route of gradual
transfer to the market economy and the transition period was intended to last for several
years.1

Regardless of the choice of route to the market economy in former USSR countries, the
collapse of Soviet Union had created possibilities for major businesses in developed countries
to engage in revenue maximization through entering the markets of newly independent states.
Major US and European companies were provided with opportunities of entering new
markets through exporting, formation of joint-ventures, initiating wholly-owned subsidiaries,
franchising, licensing and other new market entry strategies.

Political implications of the collapse of the Soviet Union relates to strengthening the role of
the United States in global affairs. Due to the collapse of USSR, the USA lost a strong
competitor in global affairs and this fact has had immense positive implications on the level
of hegemony of the US. Furthermore, it can be convincingly argued that regardless of
motives, US military interventions in Afghanistan, Iraq and a range of other countries during
the last two decades might have been prevented if not for the collapse of the Soviet Union.

It is important to note that under the rule of present president of Russia, Vladimir Putin since
2000 Russia has been able restore its influence and position in dealing with global affairs to a
certain extent. However, drawing parallels between current position of Russia and the
1
Cassis, Y. (2011) “Crises and Opportunities: The Shaping of Modern Finance” Oxford University Press
influence of USSR is not fully appropriate due to substantial changes in geo-political
landscape that took place during the last two decades caused by intensifying forces of
globalization, increasing role of information technology and internet, unprecedented level of
threat of international terrorism and a range of other reasons.

CONCLUSION

In this research paper an attempt has been made to reflect on the main points related to
reasons and implications associated with the event. Factors that have fueled the collapse of
USSR include but not limited to substantial disadvantages associated with centrally-planned
economic system such as inefficiencies associated with resource distribution, lack of
economic stability and lack of motivation for quality improvement due to the absence of
competition.

Moreover, high levels of corruption at various levels in USSR member countries and vast and
fundamental cultural differences between certain members of the Soviet Union coupled with
dramatic reforms initiated by Gorbachev that the country was not ready for can be
highlighted as main reasons behind the collapse of the USSR.

Implications associated with the collapse of USSR have been found to relate to both levels –
economic and political. Specifically, in economic level the collapse of the Soviet Union has
created new markets for businesses headquartered in the USA, Europe and elsewhere to
benefit from through exporting, formation of joint-ventures, initiating wholly-owned
subsidiaries, franchising, licensing and other new market entry strategies. On political level,
on the other hand, with the collapse of the Soviet Union no country was left in the world map
that could possibly challenge hegemonic ambitions of the United States.

To summarize discussions, it can be stated that assessment of implications of the collapse of

Soviet Union provided above are based on the realities of current geo-political
environment. Accordingly, as many other events in history assessment of the role and
implications of Soviet Union may be perceived differently in the future than it is perceived
today due to other major geopolitical events that yet to take place.