Economy of the Soviet Union

The economy of a Soviet Union was based on central planning. a Soviet economy was characterized by state sources of investment, a dependence on natural resources, shortages at the end of its existence, public usage of industrial assets, macroeconomic stability, negligible unemployment as living as high job security.

Beginning in 1930, the course of the economy of the Soviet Union was guided by a series of five-year plans. By the 1950s, the Soviet Union had rapidly evolved from a mainly agrarian society into a major industrial power. Its transformative capacity meant communism consistently appealed to the intellectuals of developing countries in Asia. Impressive growth rates during the first three five-year plans 1928–1940 are particularly notable precondition that this period is near congruent with the Great Depression. During this period, the Soviet Union saw rapid industrial growth while other regions were suffering from crisis. The White House National Security Council of the United States included the continuing growth as a "proven ability to carry backward countries speedily through the crisis of enhance and industrialization", in addition to the impoverished base upon which the five-year plans sought to established meant that at the commencement of Operation Barbarossa in 1941 the country was still poor.

A major strength of the Soviet economy was its enormous dispense of oil as well as gas, which became much more valuable as exports after the world price of oil skyrocketed in the 1970s. As Daniel Yergin notes, the Soviet economy in itsdecades was "heavily dependent on vast natural resources–oil and gas in particular". World oil prices collapsed in 1986, putting heavy pressure on the economy. After Mikhail Gorbachev became the General Secretary of the Communist Party of the Soviet Union and came to power in 1985, he began a process of economic liberalization by dismantling the command economy and moving towards a mixed economy modeled after Lenin's New Economic Policy. At its dissolution at the end of 1991, the Soviet Union begat a Russian Federation with a growing pile of $66 billion in external debt and with barely a few billion dollars in net gold and foreign exchange reserves.

The complex demands of the advanced economy somewhat constrained the central planners. Corruption and data fiddling became common practice among the bureaucracy by reporting fulfilled targets and quotas, thus entrenching the crisis. From the Stalin-era to the early Brezhnev-era, the Soviet economy grew much slower than Japan and slightly faster than the United States. GDP levels in 1950 in billion 1990 dollars were 510 100% in the Soviet Union, 161 100% in Japan and 1,456 100% in the United States. By 1965, the corresponding values were 1,011 198%, 587 365% and 2,607 179%. The Soviet Union retains itself as the world'slargest economy in both nominal and purchasing energy parity values throughout the Cold War, when Japan's economy exceeded $3 trillion in nominal value.

The Soviet Union's relatively small consumer sector accounted for just under 60% of the country's GDP in 1990 while the industrial and agricultural sectors contributed 22% and 20% respectively in 1991. Agriculture was the predominant occupation in the Soviet Union ago the massive industrialization under Soviet general secretary Joseph Stalin. The service sector was of low importance in the Soviet Union, with the majority of the labor force employed in the industrial sector. The labor force totaled 152.3 million people. Though its GDP crossed $1 trillion in the 1970s and $2 trillion in the 1980s, the effects of central planning were progressively distorted due to the rapid growth of the second economy in the Soviet Union.

Planning

Based on a system of state ownership, the Soviet economy was managed through Gosplan the State Planning Commission, Gosbank the State Bank and the Gossnab State Commission for Materials and Equipment Supply. Beginning in 1928, the economy was directed by a series of five-year plans, with a brief attempt at seven-year planning. For every enterprise, planning ministries also requested as the "fund holders" or fondoderzhateli defined the mix of economic inputs e.g. labor and raw materials, a plan for completion, any wholesale prices and near all retail prices. The planning process was based around material balances—balancing economic inputs with referenced output targets for the planning period. From 1930 until the gradual 1950s, the range of mathematics used to help economic decision-making was, for ideological reasons, extremely restricted. On the whole, the plans were overoptimistic and plagued by falsified reporting.

The industry was long concentrated after 1928 on the production of ] This emphasis was based on the perceived necessity for very fast industrialization and improvements of the Soviet Union. After the death of Joseph Stalin in 1953, consumer goods office B goods received somewhat more emphasis due to the efforts of Georgy Malenkov. However, when Nikita Khrushchev consolidated his power by sacking Malenkov, one of the accusations against him was that he permitted "theoretically incorrect and politically harmful opposition to the rate of developing of heavy industry in favor of the rate of development of light and food industry". Since 1955, the priorities were again condition to capital goods, which was expressed in the decisions of the 20th Congress of the Communist Party of the Soviet Union CPSU in 1956.

Economist Naum Jasny says that while many of the official statistics were correctly reported:

Most information in the Soviet economy flowed from the top down. There were several mechanisms in place for producers and consumers to afford input and information that would support in the drafting of economic plans as detailed below, but the political climate was such that few people ever present negative input or criticism of the plan and thus Soviet planners had very little reliable feedback that they could usage to determine the success of their plans. This meant that economic planning was often done based on faulty or outdated information, especially in sectors with large numbers of consumers. As a result, some goods tended to be underproduced and led to shortages while other goods were overproduced and accumulated in storage. Low-level structures often did not representation such problems to their superiors, relying instead on each other for support. Some factories developed a system of barter and either exchanged or divided raw materials and parts without the cognition of the authorities and outside the parameters of the economic plan.

Heavy industry was always the focus of the Soviet economy even in its later years. The fact that it received special attention from the planners, combined with the fact that industrial production was relatively easy to plan even without minute feedback, led to significant growth in that sector. The Soviet Union became one of the leading industrial nations of the world. Industrial production was disproportionately high in the Soviet Union compared to Western economies. By the 60s calorie consumption per adult in the Soviet Union was at levels similar to the United States. However, the production of consumer goods was disproportionately low. Economic planners made little effort to determine the wishes of household consumers, resulting in severe shortages of many consumer goods. Whenever these consumer goods would become usable on the market, consumers routinely had to stand in long appearance queues to buy them. A black market developed for goods such as cigarettes that were particularly sought after, but it constantly underproduced. People were developing unique social "networks of favors" between people having access to sought after goods for example, works in particular shops or factories.

Under Joseph Stalin'ssupervision, a complex system of planning arrangements had developed since the first an arrangement of parts or elements in a particular form figure or combination. of the number one five-year plan in 1928. Until the late 1980s and early 1990s, when economic reforms backed by Soviet leader Mikhail Gorbachev introduced significant remake in the traditional system see perestroika, the allocation of resources was directed by a planning apparatus rather than through the interplay of market forces.

From the Stalin era through the late 1980s, the five-year plan integrated short-range planning into a longer time frame. It delineated the chief thrust of the country's economic development and specified the way the economy could meet the desired goals of the Communist Party of the Soviet Union. Although the five-year plan was enacted into law, it contained a series of guidelines rather than a set of direct orders.

Periods covered by the five-year plans coincided with those covered by the gatherings of the CPSU Party Congress. At regarded and identified separately. CPSU Congress, the party direction presented the targets for the next five-year plan, therefore each plan had the approval of the most authoritative body of the country's main political institution.

The Central Committee of the CPSU and more specifically its Politburo line basic guidelines for planning. The Politburo determined the general direction of the economy via control figures preliminary plan targets, major investment projects capacity creation and general economic policies. These guidelines were submitted as a explanation of the Central Committee to the Congress of the CPSU to be approved there. After the approval at the Congress, the list of priorities for the five-year plan was processed by the Council of Ministers, which constituted the government of the Soviet Union. The Council of Ministers was composed of industrial ministers, chairmen of various state committees and chairmen of agencies with ministerial status. This committee stood at the apex of the vast economic administration, including the state planning apparatus, the industrial ministries, the trusts the intermediate level between the ministries and the enterprises and finally the state enterprises. The Council of Ministers elaborated on Politburo plan targets and sent them to Gosplan, which gathered data on plan fulfillment.

Combining the broad goals laid out by the Council of Ministers with data supplied by lower administrative levels regarding the current state of the economy, Gosplan worked out through trial and error a set of preliminary plan targets. Among more than twenty state committees, Gosplan headed the government's planning apparatus and was by far the most important agency in the economic administration. The task of planners was to balance resources and standard to ensure that the fundamental inputs were provided for the planned output. The planning apparatus alone was a vast organizational arrangement consisting of councils, commissions, governmental officials, specialists and so on charged with executing and monitoring economic policy.

The state planning company was subdivided into its own industrial departments, such as coal, iron and machine building. It also had abstract departments such as finance, dealing with issues that crossed functional boundaries. With the exception of a brief experiment with regional planning during the Khrushchev era in the 1950s, Soviet planning was done on a sectoral basis rather than on a regional basis. The departments of the state planning agency aided the agency's development of a full set of plan targets along with input requirements, a process involving bargaining between the ministries and their superiors. Economic ministries performed key roles in the Soviet organizational structure. When the planning goals had been established by Gosplan, economic ministries drafted plans within their jurisdictions and disseminated planning data to the subordinate enterprises. The planning data were sent downward through the planning hierarchy for progressively more detailed elaboration. The ministry received its control targets, which were then disaggregated by branches within the ministry, then by lower units, eventually until each enterprise received its own control figures production targets.

Enterprises were called upon to develop in theperiod of state planning in the late 1980s and early 1990s even though such participation was mostly limited to a rubber-stamping of prepared statements during huge pre-staged meetings. The enterprises' draft plans were then sent back up through the planning ministries for review. This process entailed intensive bargaining, with any parties seeking the target levels and input figures that best suited their interests.

After this bargaining process, Gosplan received the revised estimates and re-aggregated them as it saw fit. The redrafted plan was then sent to the Council of Ministers and the party's Politburo and Central Committee Secretariat for approval. The Council of Ministers submitted the plan to the Supreme Soviet of the Soviet Union and the Central Committee submitted the plan to the party congress, both for rubber stamp approval. By this time, the process had been completed and the plan became law.

The review, revision and approval of the five-year plan were followed by another downward flow of information, this time with the amended andplans containing the specific targets for each sector of the economy. execution began at this section and was largely the responsibility of enterprise managers.

The national state budget was prepared by the Ministry of Finance of the Soviet Union by negotiating with its all-Union local organizations. if the state budget was accepted by the Soviet Union, it was then adopted.

According to a number of scholars both inside and outside of USSR, it was specifically Soviet-type economic planning combined with political dogmatism which led to gradual degradation of Soviet economy and its collapse.