The collapse of

communist systems –
was it foreseen?
The Evolution of Economic Systems
in Eastern Europe
______________________
Rashad Mehbaliyev Spring, 2010
 Khrushchev said about
communism in 1958:

“If, after forty years of communism, a person

cannot have a glass of milk and a pair of shoes, he
will not believe that communism is a good thing.”
Views (Mark Harrison)
 Command economies are not intrinsically
unstable;
 The Soviet economy was stable until it
collapsed.
 The dictator’s surrender triggered Soviet
collapse;
 The collapse of output in 1989–92 was not a
transformational recession arising from shock
therapy.
Views (Stephen Lee Solnick)
Why the reforms of perestroika caused Soviet
institutional structures to break down rather than to
adopt or evolve?
Answer: 3 large and very important Soviet institutions:
- The Komsomol;
- Military conscription;
- Job assignment program.

Conclusion: Mikhail Gorbachev's reforms rechanneled

the self-seeking behavior of bureaucrats in directions
that destroyed rather than revived Soviet institutions.
Soviet Union collapsed not because ideology failed, the
system imploded because bureaucrats at all levels made
off with state assets at the first opportunity, hollowing
out the state or "stealing" it.
Chronology of Some Important
Perturbations – until 1985
The way to the economic collapse of
communism
 1920 - Severe drought;
 1921 - The New Economic Policy (NEP) was
introduced;
 1928-1940 – The Collectivisation in USSR;
 1962 – Sharp increase in the prices of butter
and meat;
 1963 - Production levels had declined sharply
in every branch of industry;
Chronology of Some Important
Perturbations – 1985
 1985 Gorbachev came to power.
 Some problems needed to be solved:
- The wasteful use of resources;
- The lack of innovation because of lack of incentives
(investment in new ideas and industry).
- Poor division of labour;
- Too many costly products were being produced;
- Ineffective use of resources;
- Low productivity;

Gorbachev's solution to these problems: "Perestroika"

The aim of Perestroika
 To double output by the year 2000. But:
- It was not until 1987, however, that these ideas were
put into a concrete plan;
- Anti-alcohol campaign was initiated (1985), however
after 3 years they had to admit that this policy was a
complete failure (1988) and it was abandoned (1990).
- The USSR had a budget deficit of R37 billion by
1985; it increased to R100 billion or 11% of the GNP
in 1989 and was predicted to rise to R120 billion
(from 3% in 1985 to 14% in 1989).
- Inflation increased to over 5%;
- Prices failed to reflect the high cost of production
and many companies were working at a loss; it
didn't remove the old price system.
Chronology of Some Important
Perturbations – 1986, 1987
 1986
- April: Accident at the Chernobyl nuclear
power station in Ukraine.
 1987
- January: Plenary session of Central
Committee places political reform on the
agenda;
- June: Central Committee asserts need for
significant economic reform.
Chronology of Some Important
Perturbations – 1988
 1988
- February: Bloody conflict between Armenia and
Azerbaijan (Nagorno-Karabakh problem);
- April: Agreement ending Soviet intervention in
Afghanistan; Wave of strikes in Poland against inflation;
- July: Formation of non-Communist popular front in
Estonia;
- November: Supreme Soviet of Estonia declares
sovereignty;
- December: Gorbachev says that Eastern European
countries are free to choose their own and economic
paths.
Chronology of Some Important
Perturbations – 1989
 1989
- February: First competitive election campaigns
in the Soviet Union in over sixty years;
- May: Lithuania declares sovereignty;
- September: Supreme Soviet recognizes workers'
right to strike;
- November: Destruction of Berlin Wall;
- December: Emphatic rejection of Communism in
Eastern Europe weakens belief in Communist
ideology.
Chronology of Some Important
Perturbations – 1990
 1990
- January: End of special trading relationship between Soviet
Union and Eastern Europe;
- February: New CPSU program calling for market economy
and individual ownership of means of production;
- Elimination of constitutional clause requiring
Communist party leadership of the Soviet state ;
- March: Congress of People's Deputies elects Gorbachev the
president of USSR;
- May: Yeltsin was elected the chair of Russian republic
Supreme Soviet;
- Increase in the price of bread;
- Russian republic declares its laws have priority over
those of the Soviet Union;
- October: Gorbachev wins Nobel Peace Prize.
Chronology of Some Important
Perturbations – 1991
 1991
- March: 76% support union (Armenia, Georgia,
Moldavia, Estonia, Latvia, and Lithuania did not
participate) in referendum on future structure of
USSR;
- April: Congress of Russian republic establishes a
Russian presidency;
- June: Yeltsin elected president of Russian republic;
- December: Presidents of Russia, Ukraine, and
Belorussia sign an agreement dissolving the USSR;
- Gorbachev resigns as president of the Soviet Union.
Was the collapse foreseen?

Brzezinski (1969): out of 14 authors 6 spoke of

“collapse as a possible but not immediately
expected” possibility.
References (1)
 123helpme, The Collapse of Communism in Eastern Europe,
www.123helpme.com/view.asp?id=39930
 Birman, I. I. (1989), Rosefield and My Cumulative
Disequilibrium Hypothesis: A Comment,
www.jstor.org/stable/152383
 Mark Harrison (2001), Are command economies unstable? Why
did the Soviet economy collapse?, Warwick Economic Research
Papers, No 604
 Loone Eero (1990), Perestroika, www.jstor.org/stable/152140
 Peter Mihalyi (2000), Reviewed work: Stealing the State: Control
and Collapse in Soviet Institutions by Steven L. Solnick,
www.jstor.org/stable/2566153
References (2)
 Robert Legvold (1999), Reviewed work: Stealing the
State: Control and Collapse in Soviet Institutions, by
Stephen Lee Solnick,
http://www.jstor.org/stable/20049246
 Solnick, Stephen L. (1998), Stealing the State: Control
and Collapse in Soviet Institutions, Cambridge, MA:
Harvard University Press
 Tom Mayer (2002), The Collapse of Soviet Communism:
A Class Dynamics Interpretation,
www.jstor.org/stable/3086457
Thanks for your attention!