From the 1930s and into the 1970s, the Soviet economy had been geared for heavy industry and the military. Nikita Khrushchev in late 1956 predicted that the Soviet Union would bury (surpass) the West economically in twenty years or so, and around the 1960s the Soviet economy, as measured in Gross National Product (GNP) was growing at about 6 percent a year.
In 1960 the Soviet Union was producing 12.5 percent of the world's goods (from farm and factory), just under half that of the United States (25.9 percent) and the European Economic Community (26 percent). But after 1975 the Soviet Union's GNP fell to an annual growth rate of 2.6 to 2.7. The Soviet Union was keeping up with the United States in the production of steel, pig iron, cement and oil, but the future lay in electronics and specialty chemicals. The Soviet Union did not keep up with communications electronics or the design and manufacturing of automobiles. In manufacturing it fell behind Japan, Germany, Britain, and Italy. The biggest customer for its manufactured goods was its military, and manufacturing for the military continued to use its most skilled people.
The Soviet Union's Large enterprises were to some extent welfare institutions, places of employment rather than concern with productivity and costs and efficiency in production. The rigid command economy created by Stalin in the 1930s was not suited for the innovation-driven rapid changes in technology that arrived after Leonid Brezhnev had become General Secretary of the Communist Party (in 1964). The Soviet Union had no independently wealthy individuals looking to bankroll a new business with a new idea. In the Soviet Union it was the central government that was doing the investing, not only in the military but also in social programs, including spending money to keep bread available and at a low price. Money to modernize manufacturing was often lacking. Bureaucrats were deciding what was to be manufactured, and they were doing poorly coordinating distribution, sometimes seen in metal goods rusting away at railway sidings.
The agricultural sector of the Soviet economy was inefficient. Under Secretary General Brezhnev most farming remained collectivized, with four percent of the Soviet Union's arable land being farmed on the side as privately owned plots – with this four percent producing around twenty-five percent of the Soviet Union's agricultural output. Before World War I, Russia had been one of the greatest food exporters in the world, but it was now one of the world's biggest importers. A decline in sales of its oil abroad and the purchasing of food from abroad was a trade imbalance that was costing the Soviet Union hard currency and gold. Increases in the printing of money were contributing to the declining value of their currency, the ruble.
What grew during the Brezhnev years were bureaucracy and the size of the Communist Party – many Party members working in bureaucracies. And growing too were the number of vacation residences, pensions, perks and privileges for Party members. In the eyes of the common Soviet citizen, corruption was growing alongside economic stagnation. They complained about people with influence not responding to their needs. Workers were given goals that at times seemed abstract or remote from tangible benefits. Common people were still living in cramped housing, and they were seeing little material progress for themselves.
Brezhnev wanted both to maintain the Soviet Union's standing in Europe and to maintain good relations with the West. He spoke of all the sacrifices that the Soviet people had made in World War II and sent tanks into Czechoslovakia in 1968 believing that Alexander Dubcek's "socialism with a human face" was a threat to Soviet hegemony in East Europe.
Brezhnev made himself a champion of Détente, and as a sign of his desire for good relations with the US he kissed President Carter on the cheek. Carter dealt him a blow by boycotting the summer Olympic games in Moscow. Then Brezhnev had President Reagan to deal with.
CONTINUE READING: Gorbachev and Reagan
Copyright © 2018 by Frank E. Smitha. All rights reserved.