The Soviet Economy, Explained

Recently, I watched a video by a popular YouTube channel about the economy of the Soviet Union. I have long been interested in how Soviet society worked. But sadly that particular video failed to scratch the itch. It felt a bit watered down. So I figured I would make my own.

For generations, the Soviet Union grew faster than every other developing country except one. But once that strategy ran its course, the Soviets failed to adapt and things fell apart. It is a challenge that every country has to face at one time or another in the process of its development.

In this video, I want to look at the rise and decline of the Soviet Economy.

Links:

[Asianometry]

If you enjoyed this topic, consider subscribing. Have any suggestions or ideas? Feel free to email me.

[holarryho]

"Right arm was overworked and they needed to pump with their left"

Story of my life

[edwardgrigoryan]

As a longtime student of Soviet history and economics, I congratulate you on this video essay. This is an outstanding resource. "An economy is more than a sum of numbers and outputs. It is a representation of the life and livelihood of its inhabitants, " and the words that come after at the very end, is eloquently put.

[gagamba]

The Soviet Union enterred into economic trouble in mid 1950s.

Many don't know this, but Soviet workers were required to use 1/12th of their annual income to buy government bonds. In '56 and '57 it came to be understood that by '63 the amount owed to the people by the government would exceed the amount taken from the people's mandatory bond purchases. The government would not only run into a funding shortfall needed to sustain itself, it would be unable to repay the people what was owned in full, and the amount owned would only grow larger over time.

Looking for solutions, rather than understand this as a finacial problem in need of a financial solution, the gov't decided to appeal to the people's emotions. 'Please donate your bonds to the gov't that has done so much for you. It's your patriotic duty' was the proposed solution accepted. Before this was announced nationally, the gov't decided to test this appeal with some workers to assess their response. It was soundly rejected. 'You forced us to buy these. We expect repayment.'

The government announced it would end the mandatory purchase of these bonds for most workers. Further, it would suspend repayment of the bonds for 25 years. It would also not pay interest on the sum owed during these 25 years.

Because the government was the maker and seller of almost everything, it had the opportunity to set prices. Some things, such as basic consumer goods like food, were set artifically low. Utiliies were not charged by use but a flat fee. The government was losing money hand over fist with these. However, it could profit from the sale of other consumer goods of which there was pent up demand: home appliances, TVs, radios, cameras, and autos for example. But, production was so meager people had to wait years for these items, so what could have been profitable for the government wasn't. Soviet workers were cash rich but with little to buy readily beyond the basics.

To make up for the loss of revenue caused by the end of bond purchases, the government resorted to gambling: a national lottery. The prizes were not cash but hard-to-get consumer items such as automobiles. Delivered to the winners with no wait. The lottery proved quite popular.

Another example of mismanagment was the publishing of magazines and newspapers. You, a consumer in a capitalist country, might think subscribing to periodicals is a very easy task. You sign up, soon thereafter your subscriptions arrive, and you pay at the contracted schedule. Soviet people loved magazines. Especially popular ones were for children, travel, nature, hobbies, and the like. Popular magazines were almost impossible for people to obtain through subscriptions. Demand greatly exceeded supply. People would even queue at the post office the night before subscriptions were opened to get their name on the list. Often the postal employees would themselves subscribe to the most popular magazines before opening the doors, so people who had queued through the night failed to get their names on the subscriber list. Highly sought after magazines had value. They were used to obtain favours, as an medium of exchange (a surrogate currency), and even as away to represent one's clout.

Because all publications, subscriptions, and distribution were handled by the state, it used its power to decide not only what was printed by also how many copies would be published through the allocation of resources such as newsprint, ink, access to printing presses, etc. It also forced people to subscribe to several unwanted magazines to obtain a more popular title. A result was influential gov't ministries, for example the military, were provided an abundance of resources to print its newspaper Red Star and magazines. Not only were these sold to service members, there were piled high at newsagents' kiosks throughout the country for sale to everyone else. With little demand by anyone else. Red Star was one of most printed daily newspapers in the country. It had very few buyers vice its authorised publishing run. But it continued to be provided resources at the expense of others newspapers and magazines, ones people actually wanted and ones the government could have earnt a profit.

[MrTalkingzero]

I was born in the Soviet Union in 1973 and lived there for 17 years, a few months shy of its collapse in August of 1991. From my personal experience, from people around me, my peers and stories in the streets I have concluded that human beings need incentive to strive and to prosper. This was evident back in the Soviet Union where you were paid the same regardless of how well you worked and this is evident in the west today in the form of malicious compliance to authoritarian bosses and work environments. Yes, the Soviets accomplished alot in many spheres but it was done in a rough, crude, forceful manner and many real successes came from actually going against the system in such fields as science and technology. Thank you so much for your quality work!

[ReviveHF]

That's why Bruce Lee once said: "Don't get set into one form, adapt it and build your own, and let it grow, be like water".

[daPawlak]

Suprisingly balanced, most videos about Soviet Union are either propagandistic horror shows or just as propagandistic hagiographies. Great work!
As for your thoughts at the end, funny enough I am happy to be born in Soviet satelite Polish Peoples Republic instead of pre-war capitalistic regieme. Thanks to it we now have free health care, higher education and industrialised country. Both my parents would have zero chances for social advancement in pre-war Poland, but in socialistic regieme got masters degrees despite being from poorest of pesantry. Authoritarianism was definitly bad, but overall socialistic legacy is mixed bag.

[harrykekgmail]

Superb. Never knew this aspect of Russian recent past. Thank you

[florianmerten]

those chineese theories about soviet economy and collaps at 1:30 .. that sounds extremly interesting

[k-c]

It is tiring to not have honest discussion about the Soviet Union as a study subject, it is a vast and heated topic. A lot of it comes from hate and political propaganda. I appreciate your honesty and respect opinions even on the controversial subjects.

[deepak]

Yay, thank you for this. I was always interested in the soviet union economy and nobody ever talked about it.

[domtweed]

This was an excellent (and impressively nuanced) overview of the Soviet economy. I was very impressed.

Please make that video about Chinese views of the USSR.

[jariziel]

Thanks for the very interesting video!
There was a big competition between the USSR and the West, therefore to this day its very hard to find unbiased opinions. Dont treat mine as unbiased, stay sceptical, stay curious ;)

[galreserve]

Ding-dong, russian here.
I was growing up in late USSR, and it was a nightmare.
Shop that sell nothing, media that telling crap, people that tries to control your every single step..
Nightmare

[mukiex]

While this video does a good 17-minute breakdown as to the history, I think Basic Economics does a really good job of breaking down the long-term failure. Mind you, at a quarter hour short of a full day's runtime, it has plenty of opportunity to go into detail a great number of times, but the examples therein are incredibly eye-opening.

The Soviet Union had a ton of great minds. This is true, no doubt. But an economy is always changing, and there's no degree of static knowledge that is going to "cut it" in perpetuity. Even thousands of brilliant minds cannot win out over millions of vendors, suppliers, workers, employers, and consumers making and adjusting their economic decisions across millions of different possible fields.

For what it's worth, the Soviet Union lasting 75 years needs proper context. Marx described the American economy, at just over the 150 year mark, as being in "late capitalism", its final stages. That economy has survived and even thrived in the 80 years since that announcement. Essentially, an economy run by a disparate mass of private actors has been dying for longer than its centralized, organized replacement existed from birth to death.

[sisyphusvasilias]

A Few Other Key factors:
The Demographic impact of WW2: While USA benefited from the post war Baby Boom that undergirded the economic growth of the second half of the twentieth Century, USSR and Russia today struggled to cope with the impact of depopulation with around 20million Soviet deaths during WW2.
The Devastation of all Industry 1914-21 and WW2: WW1 devastated Western Imperialist Russia. The Civil War impacted nearly the entire country, it was a mobile war that carried devastation to all industrial regions. WW2 completely annihilated European Russia. Germany not only stripped Russian Factories and Infrastructure of anything or worth, they enacted a scorched earth policy of destroying all infrastructure and salting/poisoning agricultural lands as they retreated.
Capital and the impact of Bretton Woods: Bretton Woods established the US Dollar as the primary and near exclusive mode of international trade. While Western Europe and the US Economy could rebuild with ready and cheap access to US Dollars, the USSR and Eastern Bloc was restricted and did not have anything like the supply of Capital the Western Industrialised economies had.

[raul-kmmq]

their massive housing program is something to admire

[XxLIVRAxX]

Unsustainable imports of food and consumer goods using hard currency from unrelaible oil exports? Sounds awfully familiar.

Greetings from Venezuela.

[GoooObama]

I love how you cover a wide array of random topics which attracts your curiosity. Kinda how my mind works too 👌🏽

[mrofficial]

Great video, I like the fact that you analyze it in a fairly unbiased way.