A spin off of the thread on what the Soviet Union did better than the west. An obvious theme is apparent in the replies in that thread. Almost everything discussed are weapons or other items that have military use (tanks, fighter jets, rifles, Zeiss lenses, submarines, nuclear bombs, etc.). It seems that the Soviet Union failed to work on developing better versions of stuff for everyday civilian use. Why is that? Did they consider things like building a better car a waste of money, even though western companies like Ford and GM made, rather than lost money doing just that? I don’t mean to focus just on cars for civilian use, but consumer goods in general. Clothing, furniture, various types of entertainment (movies, music, TV shows, etc.), food other than the basics like wheat, beets, and potatoes, and so on. The Soviet central planners failed to prioritize all kinds of things. Why was that? Could they have managed to keep up with the western economies had they tried, or did they decide they were doomed to failure by even making an attempt to do so, and consequently decided to focus mostly on heavy industries and military tech?
The problem is the central planning itself. No relatively small group of central planners can compete with a free market. You are comparing the efforts of a few so-called experts with that of millions of entrepreneurs. The central planners were doomed to failure from the start.
This was combined with an authoritarian system of government, where individual efforts were punished. In addition, the workers saw no benefit to working harder…so they only worked as hard as they needed to avoid being punished. And corruption was rampant.
They did try. It didn’t work.
A third of the USSR was devastated during WWII, either by the Nazis destroying factories, cities, and farmland to keep them from being used by the Russians, or by Stalin doing that to keep them from being used by the Nazis. Everything in the country had to be rebuilt. Stalin’s problem was that he had no money. GDP per person was less than half of the U.S. He had to prioritize what to rebuild first.
Consumer goods were not high on that list. Military and other heavy industry was far more important to him. The result was an unbalanced economy. Industry grew rapidly, although never getting more than a third of output in the U.S. Other goods were famously scarce, with legendarily long lines whenever something needed finally reached stores.
Stalin had the economic advantage of having the Eastern Bloc as a forced recipient of goods that wouldn’t have been acceptable elsewhere. That and their oil resources gave Stalin a steady stream of revenues.
Khrushchev tried to turn that around in the late 1950s, after the economy had recovered, and promised parity with the U.S. by the 1970s. It did not happen. Military needs always came first.
An academic analysis is available at The rise and decline of the Soviet economy. But you have to get through lines like: “Is a low elasticity of substitution really the explanation for the Soviet climacteric?” [Answer: no.] He thinks that the USSR did better than most analysts have said, and provides an interesting history. I have no opinion; I just wanted to copy that sentence.
Not only does central planning have inherent inefficiencies (another one: Central planning reacts more poorly to local conditions, a problem also seen in the military in the Ukraine War), but the central planners were chosen more for their loyalty to the regime than for their competence in economic planning.
Right!
The Western-style free market economy relies on the profit motive to do a lot of heavy lifting. The idea is that because people and companies want to make money, they’ll do a whole lot of stuff as part of that.
It’s basically a way to crowdsource an economy, if you squint just a little bit. Companies will provide military goods and civilian goods, and to the quality that their customers demand, and for the price that they’re willing to pay. And if there’s extra demand, more companies will move into that space, and if there’s less, they’ll move out. And it works this way all the way from the end consumer to the very first person/company catching the fish, planting the seeds, pumping the oil, chopping the trees, and so forth. At every level someone’s trying to add value and make a profit, which makes the economy extremely responsive (in an economic sense) to changes.
And in an economic sense, it’s very efficient.
Contrast this with centrally planned economies, where the planners look into their crystal balls and try to predict how many tanks, stoves, gallons of gasoline, pencils, rolls of TP, and so forth that an economy may need. And how many feet of armor plate, seat cushions, graphite, logs, heating elements, and whatever else may be required to build those things. And whatever’s needed for those things as well. So it’s a monumental task in its own right.
And let’s say that the geopolitical situation changes- all of a sudden barley is hard to come by. The centrally planned economy is expecting to have a certain level of input and output for anything requiring barley- beer, malt syrup, beef and barley soup, etc… So they’re suddenly off their pace- everywhere that barley is needed is now short of their targets.
In a market economy, the price would rise, substitutes would be found, and things would automatically adjust- maybe beer would be more expensive. Maybe it would have more rice/corn in it. Maybe something would be subbed in for barley in other products. Either way, the system adjusts because the price of things sends a lot of information about scarcity and pushes alternatives to come to the front of the line. Or the reverse if too much of something is being produced is equally true.
Of course, market economies have their own set of problems- workers are frequently mistreated, there are incentives for cheating, and so forth, but those aren’t really germane to why the Soviet system failed.
Basically it sounds good on paper- the idea that an economy could be planned and controlled by the government would seem like an ideal state for a communist regime, because it avoids all the inherent uncertainty and undirected nature of a market economy, but it’s that uncertainty and undirected nature that allow market economies to be as efficient as they are.
The big advantage to a centrally-planned economy is that, if it’s planned intelligently, it can react to changing circumstances quicker, or even react to changes before they happen, if they can be anticipated. In a distributed economy, each part interacts with only one or two layers upstream and downstream from it, and so you end up with companies reacting to other companies reacting to other companies reacting to… reacting to whatever the external change was. And sometimes that reaction speed is slow enough to be catastrophic: In agriculture, for instance, the fundamental time unit is one year, and if everyone now wants barley instead of wheat, you can’t replant your fields to take advantage of that until next year, and if what you have planted right now is unprofitable, it can ruin your farm.
But of course, again, that’s a comparison to an intelligently planned economy. Too often in the real world, in comparison to the free market’s slow reaction, a planned economy reacts not at all, because the planning is incompetent.
A big factor is not so much with the economic approach as it is with the communist party refusing to acknowledge imperfections. Instead of managing problems by trying to mitigate or fix them, the party would refuse to even accept their existence and try to silence imperfections. Managers would be off to Siberia if their area of control was not perfect. And it created problems all over based on the fact that no one was addressing anything.
I think it should be pointed out that the Soviet economy survived from 1922 to 1991.
People look for poor planning and organization to make a large entity to crash and fail out in days and weeks. It took 70 years for the USSR, Cuba is still going, North Korea is still going, the Roman Empire hung on for a thousand years after it dropped Republicanism, and Tesla keeps going up on the stock market.
Wrong choices do accumulate but dramatic crashes aren’t always a component of that.
It is also worth emphasizing that Russia and then the Soviet Union were much less industrialized than the US and Western Europe pre- and post World War I.
War, as noted above, set them back hugely. How many Americans died in World War II? About 380,000? And those all military. Soviet deaths? About 27 million, many civilian, meaning “now it’s hard to farm and make stuff.” Number of American cities destroyed in World War II? None. Number of Soviet cities destroyed? Wikipedia says 70,000 cities, towns, and villages. Simply housing and feeding those people took an enormous effort. So it’s not like you’re starting on a level playing field in 1945.
Add to that one lesson Soviet heads might have learned, which was “give them half a chance and all sorts of people will invade us,” from Napoleon to France and Britain and the Ottoman Empire, Germany in World War I, the US and Canada and Britain in 1919, Germany again, Churchill suggesting the Wehrmacht remnants be strengthened and sent back to fight the USSR, the US supremacy in nuclear weapons and delivery systems, and we start to see why investing in heavy industry rather than toasters was a priority.
None of this justifies any of the Stalinist crimes or decisions. But it might provide some more clues to the OP’s question.
I’ve heard it claimed in the past that part of their problem was an ideologically driven focus on a sort of naive materialism; the idea that more and bigger physical products are innately more desirable and virtuous. So people who produce nothing material like teachers were mistreated and poorly paid, heavy industry was favored over light, and “bigger is better” was a significant part of design philosophy. Rather than try to make a better plane than the US, they’d make one bigger.
An example I recall was the way research into high pressure physics went in the West and the USSR. The USSR insisted on making bigger and bigger experimental apparatus o squeeze experimental samples, culminating in a huge multi-story machine that never worked properly. The West went to diamond anvils, tiny devices you can hold in your hand and that did work.
Related: authoritarian systems are terrible at gathering feedback; everyone is silent or lies because to do otherwise results in punishment. So the planners not only are overwhelmed, they are working on bad data.
Further, the USSR specifically was obsessed with secrecy. They took the old adage “three can secret if two are dead” to its logical conclusion, and realized that if nobody knows a secret, it can’t be stolen. A good deal of important economic information was deliberately not gathered and therefore available to literally nobody, from the Poltitburo on down. Which prevented the West from knowing it to be sure, but also meant those central planners didn’t know it either.
I believe that both Cuba and North Korea allow some private business activity.
https://en.wikipedia.org/wiki/Lend-Lease#Deliveries_to_the_Soviet_Union
From October 1, 1941, to May 31, 1945, the United States delivered to the Soviet Union 427,284 trucks, 13,303 combat vehicles, 35,170 motorcycles, 2,328 ordnance service vehicles, 2,670,371 tons of petroleum products (gasoline and oil) or 57.8 percent of the aviation fuel including nearly 90 percent of high-octane fuel used,[36] 4,478,116 tons of foodstuffs (canned meats, sugar, flour, salt, etc.), 1,911 steam locomotives, 66 diesel locomotives, 9,920 flat cars, 1,000 dump cars, 120 tank cars, and 35 heavy machinery cars. Ordnance goods (ammunition, artillery shells, mines, assorted explosives) provided amounted to 53 percent of total domestic consumption.[36] One item typical of many was a tire plant that was lifted bodily from the Ford Company’s River Rouge Plant and transferred to the USSR. The 1947 money value of the supplies and services amounted to about $11.3 billion.[72][73] Unlike the other allies, the Soviets believed these supplies to be gifts to their war effort and even items that were to be returned to the US after the war, such as ships, were sent back as completely stripped hulls.[57]
Whole factories were sent-
class ii articles (durables) Transport planes & flying boats $ 154,079,000 Non-combat vehicles 559,543,000 Radio stations, receivers, locators, beacons 75,012,000 Road & airport construction equipment 8,337,000 R.R. locomotives & cars 207,975,000 Cableway bridges, portable pipelines, portable storage tanks, pontoon bridges, tents, truck assembly sets 8,338,000 Outboard motors 142,000 Salvage stations & diving gear, jetting apparatus, submarine rescue chambers, distilling apparatus & collapsible piers 977,000 Machinery & equipment 945,790,000
Out of nearly 200Million.
https://wiki.c2.com/?SovietShoeFactoryPrinciple
In Soviet Russia there is a story of a shoe factory that was pressured to increase production, as measured by quantity of shoes produced. However, the factory was a bit short on materials. So to increase production, the factory decided to produce more children’s shoes, which require less material. Eventually there was a severe shortage of adult shoes, especially larger sizes. However, the factory was meeting its production goals on paper.
The joke I heard, “They pretend to pay us. We pretend to work.”
Link please.
It’s somewhat ironic that the most famous of communist countries are propped up by capitalism. The official Soviet economy was supported by a robust secondary economy, a.k.a. the black market. A lot of Soviets purchased food from neighbors who grew it, tradesmen like plumbers or eletricians went into business for themselves unofficially, and even factory managers might arrange to trade materials in order to meet the demands of the planned economy. Somethink like 15-20% of the Soviet economy was estimated to be black market by the end of the 1980s.
One of the biggest problems with the Soviet economy was corruption. Blat is a network of favors and which allowed certain individuals access to goods or other considerations. I might make the same amount of rubles each year as Karkov over there, but because I’m a party member in good standing I get to purchase a car while he remains on the waiting list.
There was a culture of lies, vranyo, that permeated all facets of society. I tell you we have 100 engines, you know I’m lying, I know you know I’m lying, but we all ignore it because none of us wants to get in trouble. Even when the central planning was failing, oftentimes nobody said anything because of vranyo. As the manager of People’s Collective Traktor Factory 13 have a quota of 15 tractors per month, I might make 10 that work and push another 5 that barely function just to make sure my quota is met. And there’s a good chance my boss will ignore the 5 crummy tractors because they don’t want to get in trouble with their boss.
So in addition to the fundamental inefficiencies of a centrally planned economy, the Soviets had a lot of corruption to deal with.
(purported) old Russian joke:
What’s as big as a house, burns 20 liters of fuel every hour, puts out a shit-load of smoke and noise, and cuts an apple into three pieces? A Soviet machine made to cut apples into four pieces!
I don’t understand your point. Certainly the American military contribution to Russia allowed them to survive and push back against the Germans. Nevertheless, military hardware gets used up and doesn’t contribute to basic spending in the future.
It’s also true that the Soviet army looted everything they ran across in Germany when they took over the eastern part of the country, including entire factories. Again, that enabled survival after the war, not a rebuild of a major economy.
Neither explains the long-term failure of the Soviet economy. Post-war factors do a better job of laying out the self-harm their leadership did.
Ideological purity makes for a poor guide on how to structure an economy. Capitalism has much the same issue; it works better when there’s plenty of non-free-market influence.
Communism just had the issue worse because as a primarily ideological project, its followers were more prone to be willing to outright ruin themselves for the faith.
The Western world gave us Enron. You still need that central regulation.
I thought Cybersyn was pretty cool. You will note it was not a Soviet project.