Russia Economy Thread

[2handedswordsman]

But Russia literally collapsed twice. I literally mentioned the Russian Empire and the Soviet Union.

Let me alert you to a story I heard from a Russian immigrant:

Her grandfather, who worked in the fields at the time of the Revolution in 1917, didn't yet have machines to increase his productivity. This only happened with the Bolsheviks' rise to power. The fields, which were previously unproductive on most collective farms, became more productive with the mechanization of agriculture, a situation the Russian Empire hadn't resolved, when most European countries and the United States had long since overcome it.

This is a situation that literally exemplifies the backwardness of the Russian elite during the Russian Empire, and the marginalization of industrial workers ultimately provided enough reasons for the revolution to succeed and overthrow the Russian monarchy.

Well... that was a very basic summary of one of the collapses Russia experienced.

The fact that modern Russia hasn't yet collapsed doesn't mean its economic system is efficient. It's simply more efficient than previous ones and has made Russia richer, but still far from developed economies. And the fact that the modern Russian economy is resilient to the Western economic blockade doesn't mean its economic system is efficient; they're two different things.

You have to remember that USSR was banned from entire West too, way before, suffered WW2 and managed to hold a far greater political and economic power than modern Russia in the modern world. Soviet Ukraine was a seperate United Nations member. Or ruble was 1-1 to dollar. COMECON and Warsaw pact were well established for decades. Nowdays Russia starts to re-establish itself as a major power. It's global political and economical footprint is way smaller than Ussr's. And also do not forget. Yeltsin and the Democracy clowns found themselves with everything ready there, built and ready to make profit. They didn't went far as i can see

 

[magmunta]

GDP growth in Russia has been reduced by IMF again. 0.6 percent growth.

Please, Log in or Register to view URLs content!

 

[gelgoog]

These forecasts are kind of pointless when we are in October. Just wait for the official numbers.

 

[2handedswordsman]

In a poetic symmetry, China's political system collapsed twice, after emperor's fall and 1989 reached a boiling point. Thankfully CPC took the right decision not to take this step backwards

 

[Sinnavuuty]

I didn't say they were the same economies. I said that USSR economic analysis suffers from the same inaccuracies as Western punditry on China does today.

As for your "American Dream" series, I don't pay much attention to it so I don't mind it. I was referring to the general tone of the board in regards to the American economy, which I find to be rather far from reality.



Unsuccessful? Even USSR's NEP was broadly successful. Khruschev's housing policy was highly successful. My great-grandparents lived in literal huts for most of their lives, whereas my grandparents lived in a much nicer, if still relatively squalid house, but nevertheless adequate shelter for a large family.

The reality is that the USSR was not as stagnant and backward as people think in the 80s and 90s. The fall of USSR was ultimately the result of political turmoil and dissatisfaction with the government, not a complete backwardness of and stagnancy of society or the economy.

Indeed, when we consider the "triumph" of the 90s and celebration of a Pizza Hut in Moscow, Pepsi being sold in supermarkets, and a new vibrant economic middle-class in Moscow profiting from the massive import of Western culture and products... It is all rather hollow and empty considering the horrific economic consequences of privatization, destruction of savings, and an inflationary spiral.

The economy of the late 80s and 90s USSR was stable, produced a respectable number of innovations, products, and consumer goods (to say nothing of the cultural achievements of the 80s which were considerable). This is visible in objective metrics and subjective ones. The so-called "stagnancy" of the USSR is merely a subjective label issued by Western punditry and analysts who have benefitted enormously from the triumph of Western capitalism outlasting USSR's statehood. Even though the collapse had much less to do with the flaws of the Soviet economy, than it did with the political mismanagemenf of the Gorbachev administration.

There's a lot to criticize about USSR's economic policies, but calling the country as stagnant and backward is rather lazy and quite frankly, inaccurate.

I see no inaccuracy in stating that the USSR was a stagnant and backward economy, a fact attested to by President Putin himself.

You cite the case of Khrushchev's "successful" housing policy, when cohabitation was frequent and necessary, and 35% of the population lived in shared apartments until the end of the USSR. Waiting lists for housing lasted around 10 years. There was so much bureaucracy involved in the process that the Russian government identified 56 different types of housing that could be obtained through 120 different procedures.

Since the purchase, sale, and exchange of housing was prohibited (because, let's remember, they were no longer commodities), a black market for subletting was established, which some authors estimate covered 10% of all units in the city. The Khrushchevka apartments had the standard housing size for a family of four: a two-room apartment (basically one bedroom) with approximately 37-45 square meters of space (about 400 square feet). And this size was the most typical.

Basically, the communist regime failed to provide housing for the Soviet people.

As for the NEP, there's no debate, since that was at the beginning of the USSR. The stagnation and backwardness we're discussing occurred after World War II until the fall of the USSR in 1991.

As I said, the USSR's economic model was marked by several reforms. The USSR eventually improved productivity in many sectors of the economy, especially in the pre-WWII period, but the post-Stalin era was definitely marked by backwardness. I still don't understand why they're denying this reality, when it's already been established as proven.

Oh yes... the Soviet economy was so stable in the late 1980s that we can call perestroika a huge success. Consumer goods remained plentiful and inflation was contained. hahaha

I don't know what you meant by that. Talking about labels and blaming Western experts and analysts who simply talked about the problems of the Soviet economy is inaccurate and highly incoherent. I don't know what to say about this, and to avoid being rude to any forum member, I'll stick to the facts:

Contrary to your statement, in the late 1980s, the Soviet economy was already prepared for price inflation, but so-called suppressed inflation continued to be a significant factor, pushing down official inflation rates until the mid-1980s. With the advent of perestroika and some limited pro-market reforms (authorities introduced a monetary reform), Soviet citizens became increasingly able to buy and import more products. Decades of forced savings led to rampant inflation, as shortages became less acute in many cases. This "monetary surplus" flowed out of savings accounts and drove price inflation to disastrous levels.

It took some time for the official figures to catch up with reality. The regime's official figures had long underestimated even moderate levels of price inflation in earlier periods, but after the mid-1980s, the gap between official inflation and estimated real inflation widened considerably. Efremov

Please, Log in or Register to view URLs content!

the divergence, noting that in 1988, official inflation was 0.6%, but in the real market it was 6%. In 1989, official inflation was 2%, but in reality it was 8%. In 1990, it was 5.3%, but in reality it was 20%. And then the situation began to get complicated in 1991, with "official" inflation of 96.3%, which was actually 200%.

The Soviet Union collapsed soon after, and the new regime no longer released falsified inflation figures. Instead, the actual inflation rate in 1992 was estimated at over 2,300%. Hyperinflation continued for another three years, until the old Soviet ruble finally ceased to exist.

A collapsing economy was the Soviet Union's greatest problem.

 

[HighGround]

The USSR was getting increasingly indebted. That is why it collapsed. But Gorbachev's "reforms" hastened its demise.

Gorbachev got into power in 1985 in the first place because the external debt grew 10x over the past decade. The crash of the oil price ruined the Soviet economy and its leaders did little about it.

View attachment 162554

Sure, but the main issue is that it wasn't the debt that Soviet citizens were upset about. Gorbachev deregulated the economy as a response, which made everything worse. Yeah, the oil shock would've hurt, but absent Gorbachev's reforms the situation would've more or less normalized and it really wouldn't have been as bad.

What killed USSR was the mutliple whammys of empty shelves (Gorbachev's mismanagement), Dry Law (Prohibition), hollowed out State enterprises (again due to Gorbachev's mismanagement), and consistent deficit of quality consumer goods (requiring smuggling from the West).

I guess, my overarching point is that USSR didn't suddnely forget how to make cars, build housing, design pants and so on. Yeah, it was behind the West in... many things, but it wasn't a bleak wasteland. Gorbachev's policies hurt the country in such profound and visible ways, that everybody felt the need to throw off the Soviet government to fix very visible and substantive problems. The collapse of the USSR happened despite the enormous economic capacity still being there.

Countries survive high debts and supply shocks all the time. It's really the political dimension that killed USSR. If you replaced Gorbachev with a corpse who just kept things more or less the same, I believe USSR would still exist in the year 2,000.

 

[2handedswordsman]

Sure, but the main issue is that it wasn't the debt that Soviet citizens were upset about. Gorbachev deregulated the economy as a response, which made everything worse. Yeah, the oil shock would've hurt, but absent Gorbachev's reforms the situation would've more or less normalized and it really wouldn't have been as bad.

What killed USSR was the mutliple whammys of empty shelves (Gorbachev's mismanagement), Dry Law (Prohibition), hollowed out State enterprises (again due to Gorbachev's mismanagement), and consistent deficit of quality consumer goods (requiring smuggling from the West).

I guess, my overarching point is that USSR didn't suddnely forget how to make cars, build housing, design pants and so on. Yeah, it was behind the West in... many things, but it wasn't a bleak wasteland. Gorbachev's policies hurt the country in such profound and visible ways, that everybody felt the need to throw off the Soviet government to fix very visible and substantive problems. The collapse of the USSR happened despite the enormous economic capacity still being there.

Countries survive high debts and supply shocks all the time. It's really the political dimension that killed USSR. If you replaced Gorbachev with a corpse who just kept things more or less the same, I believe USSR would still exist in the year 2,000.

My great great question is why USSR athletic apparels were adidas? It was so difficult for USSR industry to produce such quality clothes or ADIDAS was paying the expences for the teams in return of subtle advertisment? LoL It utterly cultivated the Gopnik culture of Russia. The Russian rednecks

 

[Sinnavuuty]

The USSR was getting increasingly indebted. That is why it collapsed. But Gorbachev's "reforms" hastened its demise.

Gorbachev got into power in 1985 in the first place because the external debt grew 10x over the past decade. The crash of the oil price ruined the Soviet economy and its leaders did little about it.

View attachment 162554

So the collapse was caused by an economic situation.

Our friend who made the previous comment disagrees with this statement.

In reality, to refocus and modernize industrial production, the Soviet Union needed to import new machine tools from abroad. The increase in machine tool imports, coupled with the decline in international oil revenues (from 30.9 billion rubles in 1984 to 20.7 billion rubles in 1988), caused a massive increase in the deficit: from approximately 17–18 billion rubles in 1985 to 48–50 billion rubles in 1986, and rising.

This was also accompanied by a decline in domestic government revenue, as Gorbachev's anti-alcohol campaign cut sales revenues (a Soviet version of a sales tax) from 103 billion rubles in 1983–1984 to 91.5 billion rubles in 1986.

The deficit continued to rise, reaching an estimated 120 billion rubles in 1989 (or 10–12 percent of Soviet GDP).

By 1990, no one really knew the true size of the deficit, and with increasing political reforms granting greater sovereignty to the Soviet republics, about three-quarters of tax collections were withheld from the center by republican governments, effectively bankrupting the Soviet government. The Soviet government responded to these deficits by printing money, which in turn caused a sharp rise in inflation, increased shortages of goods, and a related decline in living standards. Glasnost (greater media openness) meant that the government was increasingly forced to acknowledge the scale of the economic crisis, and the public was well aware of the problem.

As economist Marshall Goldman observes: "Gorbachev's well-intentioned but misguided economic strategy was, by itself, enough to paralyze any chance of bringing about the economic revival he so desperately desired." But the macroeconomic implications of his budget deficit eventually had their own impact. Whatever their commitment to socialist economic planning, Soviet authorities in 1989 and certainly in 1990 finally understood that macroeconomics and budget deficits, particularly large ones, matter. As Gorbachev himself admitted in an October 19, 1990, speech to the Supreme Soviet of the USSR, "We have lost control of the financial situation in the country. This was our most serious mistake in the years of perestroika… Achieving a balanced budget today is the number one and most important task."

Rising inflation and the breakdown of the centralized economy (republics were declaring "sovereignty" and ownership of local resources, companies became more interested in hoarding or selling resources than in supplying them to state-designated partners, and local citizens began hoarding whatever consumer goods they could find) created a very real decline in the economy and living standards beginning in 1989 and only worsening from there (declining births, rising deaths, falling life expectancy, and a declining Russian population throughout the 1990s, and these trends were exacerbated by the economic decline and social chaos that began in the late 1980s).

The increasing decentralization of the political system made it extremely unclear who was in control of what, and Gorbachev during this period was the target of increasing attacks from conservatives, who wanted a halt to all future reforms, and radicals who wanted more reforms to proceed more quickly—Grigory Yavlinsky's "500 Days" program, a plan to implement a full-fledged market economy, and its rejection by Nikolai Ryzhkov (the Chairman of the Soviet Council of Ministers) in August 1990 is a good example.

This period also saw the rise of Boris Yeltsin as a specifically Russian politician outside the Communist Party, complete with his election to the newly created Russian presidency in June 1991. After the conservatives' failed attempt to halt the reforms in the August 1991 coup, Yeltsin led what was essentially a counter-coup (by Plokhy) that more or less wrested real power from Gorbachev. Yeltsin himself did not necessarily want the dissolution of the USSR, but the inability to create any kind of viable model of unity with the other republican leaders (especially those in Ukraine) meant that effective power went to the republican leaders after Gorbachev's resignation in December 1991.

Now, different historians covering this period will emphasize different things. Stephen Kotkin focuses somewhat on the "reformist generation," that is, the Communist Party elites, including Gorbachev, who came of age under Khrushchev's reforms and who, like Gorbachev, were interested in reforming the Soviet model to save it. Others (Leon Aron is one example) emphasize Yakovlev's role as the intellectual force arguing for glasnost and perestroika. But ultimately, Gorbachev was in charge—he was the one who retired members of the old guard and pushed through the reforms. He eventually lost control of the situation, and his missteps in dealing with the forces (primarily elite, but also popular) he unleashed paved the way for the unraveling of Soviet power and institutions in 1991.

 

[2handedswordsman]

So the collapse was caused by an economic situation.

Our friend who made the previous comment disagrees with this statement.

In reality, to refocus and modernize industrial production, the Soviet Union needed to import new machine tools from abroad. The increase in machine tool imports, coupled with the decline in international oil revenues (from 30.9 billion rubles in 1984 to 20.7 billion rubles in 1988), caused a massive increase in the deficit: from approximately 17–18 billion rubles in 1985 to 48–50 billion rubles in 1986, and rising.

This was also accompanied by a decline in domestic government revenue, as Gorbachev's anti-alcohol campaign cut sales revenues (a Soviet version of a sales tax) from 103 billion rubles in 1983–1984 to 91.5 billion rubles in 1986.

The deficit continued to rise, reaching an estimated 120 billion rubles in 1989 (or 10–12 percent of Soviet GDP).

By 1990, no one really knew the true size of the deficit, and with increasing political reforms granting greater sovereignty to the Soviet republics, about three-quarters of tax collections were withheld from the center by republican governments, effectively bankrupting the Soviet government. The Soviet government responded to these deficits by printing money, which in turn caused a sharp rise in inflation, increased shortages of goods, and a related decline in living standards. Glasnost (greater media openness) meant that the government was increasingly forced to acknowledge the scale of the economic crisis, and the public was well aware of the problem.

As economist Marshall Goldman observes: "Gorbachev's well-intentioned but misguided economic strategy was, by itself, enough to paralyze any chance of bringing about the economic revival he so desperately desired." But the macroeconomic implications of his budget deficit eventually had their own impact. Whatever their commitment to socialist economic planning, Soviet authorities in 1989 and certainly in 1990 finally understood that macroeconomics and budget deficits, particularly large ones, matter. As Gorbachev himself admitted in an October 19, 1990, speech to the Supreme Soviet of the USSR, "We have lost control of the financial situation in the country. This was our most serious mistake in the years of perestroika… Achieving a balanced budget today is the number one and most important task."

Rising inflation and the breakdown of the centralized economy (republics were declaring "sovereignty" and ownership of local resources, companies became more interested in hoarding or selling resources than in supplying them to state-designated partners, and local citizens began hoarding whatever consumer goods they could find) created a very real decline in the economy and living standards beginning in 1989 and only worsening from there (declining births, rising deaths, falling life expectancy, and a declining Russian population throughout the 1990s, and these trends were exacerbated by the economic decline and social chaos that began in the late 1980s).

The increasing decentralization of the political system made it extremely unclear who was in control of what, and Gorbachev during this period was the target of increasing attacks from conservatives, who wanted a halt to all future reforms, and radicals who wanted more reforms to proceed more quickly—Grigory Yavlinsky's "500 Days" program, a plan to implement a full-fledged market economy, and its rejection by Nikolai Ryzhkov (the Chairman of the Soviet Council of Ministers) in August 1990 is a good example.

This period also saw the rise of Boris Yeltsin as a specifically Russian politician outside the Communist Party, complete with his election to the newly created Russian presidency in June 1991. After the conservatives' failed attempt to halt the reforms in the August 1991 coup, Yeltsin led what was essentially a counter-coup (by Plokhy) that more or less wrested real power from Gorbachev. Yeltsin himself did not necessarily want the dissolution of the USSR, but the inability to create any kind of viable model of unity with the other republican leaders (especially those in Ukraine) meant that effective power went to the republican leaders after Gorbachev's resignation in December 1991.

Now, different historians covering this period will emphasize different things. Stephen Kotkin focuses somewhat on the "reformist generation," that is, the Communist Party elites, including Gorbachev, who came of age under Khrushchev's reforms and who, like Gorbachev, were interested in reforming the Soviet model to save it. Others (Leon Aron is one example) emphasize Yakovlev's role as the intellectual force arguing for glasnost and perestroika. But ultimately, Gorbachev was in charge—he was the one who retired members of the old guard and pushed through the reforms. He eventually lost control of the situation, and his missteps in dealing with the forces (primarily elite, but also popular) he unleashed paved the way for the unraveling of Soviet power and institutions in 1991.

So, a 10% of GDP debt is the real cause for an economy to fail. Interesting, we live in a matrix indeed

 

[HighGround]

I see no inaccuracy in stating that the USSR was a stagnant and backward economy, a fact attested to by President Putin himself.

You cite the case of Khrushchev's "successful" housing policy, when cohabitation was frequent and necessary, and 35% of the population lived in shared apartments until the end of the USSR. Waiting lists for housing lasted around 10 years. There was so much bureaucracy involved in the process that the Russian government identified 56 different types of housing that could be obtained through 120 different procedures.

The Soviet Union had a similar system to Chines Hukou, and yeah, it is a massive success to take millions of people out of the ruins of World War 2, and put them, their children, and their grand-children into much better housing. So yeah, I find your framing absurd. It absolutely a massive success to then improve apartment buildings and single family homes decade on decade, which is what happened.

Not everyone had the luxury of having an untouched hemisphere with a massive GI program to build millions of housing units for returning soldiers.

Basically, the communist regime failed to provide housing for the Soviet people.

As for the NEP, there's no debate, since that was at the beginning of the USSR. The stagnation and backwardness we're discussing occurred after World War II until the fall of the USSR in 1991.

Which is an absurd take. You do realize the country was literally destroyed after World War 2? It was even worse, I am a descendant of Koryo-Saram, a Korean diaspora in Central Asia. My great-grandparents were transferred from the Russian Far East into Central Asia, modern day Uzbekistan. There was literally no housing. So yes, going from shacks into a relatively decent, if inadequate, single family home was an enormous upgrade.

By US standards most European living spaces are woefully inadequate, but I wouldn't consider European homes and apartments to be unlivable.

As I said, the USSR's economic model was marked by several reforms. The USSR eventually improved productivity in many sectors of the economy, especially in the pre-WWII period, but the post-Stalin era was definitely marked by backwardness. I still don't understand why they're denying this reality, when it's already been established as proven.

Oh yes... the Soviet economy was so stable in the late 1980s that we can call perestroika a huge success. Consumer goods remained plentiful and inflation was contained. hahaha

Perestroika was literally one of the reasons why USSR collapsed. Becaues he deregulated the economy at a bad time, and he also partially deregulated in a way that exacerbated shortages and promoted hoarding.

Gorbachev's mismanagement was certainly bad, but the Soviet economic capacity was certainly not some decrepit elephant unable to make high quality goods. The biggest issue was shortage caused by Gorbachev's mismanagement. Not an inherent stagnancy of the Soviet economy.

The issue with central planning isn't the inability to produce competitive goods. Soviets have made plenty of world-class products in their history, inclduing the 80s. This was not a "stagnant" ot "backwards" society. The issue with central planning is inefficient allocation of resources.

But that's not even why the USSR collapsed anyway.

I don't know what you meant by that. Talking about labels and blaming Western experts and analysts who simply talked about the problems of the Soviet economy is inaccurate and highly incoherent. I don't know what to say about this, and to avoid being rude to any forum member, I'll stick to the facts:

Contrary to your statement, in the late 1980s, the Soviet economy was already prepared for price inflation, but so-called suppressed inflation continued to be a significant factor, pushing down official inflation rates until the mid-1980s. With the advent of perestroika and some limited pro-market reforms (authorities introduced a monetary reform), Soviet citizens became increasingly able to buy and import more products. Decades of forced savings led to rampant inflation, as shortages became less acute in many cases. This "monetary surplus" flowed out of savings accounts and drove price inflation to disastrous levels.

Perestroika actually decreased the purchasing power of the average Soviet citizen. The adoption of various appliances, availability of clothing, higher quality food, housing stock, etc all increased with time. Perestroika was catastrophic becuase it nearly reversed that trend completely.

Certainly, there were periods that were better and periods that were worse. The reason for Perestroika in the first place was the slowing of economic growth, but nonetheless there was growth and a general improvement to people's lives. By contrast, Perestroika was almost entirely a negative experience for people who lived through that time.

The minor improvements in avaialbility of some goods and services are entirely offset by the huge negative consequences of empty store shelves, which were a result of Perestroika, and not a sudden collapse of Soviet factories to make products.

It took some time for the official figures to catch up with reality. The regime's official figures had long underestimated even moderate levels of price inflation in earlier periods, but after the mid-1980s, the gap between official inflation and estimated real inflation widened considerably. Efremov

Please, Log in or Register to view URLs content!

the divergence, noting that in 1988, official inflation was 0.6%, but in the real market it was 6%. In 1989, official inflation was 2%, but in reality it was 8%. In 1990, it was 5.3%, but in reality it was 20%. And then the situation began to get complicated in 1991, with "official" inflation of 96.3%, which was actually 200%.

The Soviet Union collapsed soon after, and the new regime no longer released falsified inflation figures. Instead, the actual inflation rate in 1992 was estimated at over 2,300%. Hyperinflation continued for another three years, until the old Soviet ruble finally ceased to exist.

A collapsing economy was the Soviet Union's greatest problem.

Perestroika was almost the entire cause of USSR's economic collapse. Prior to 1986 the country wasn't collapsing. It wasn't even in crisis. The economic circumstances were a mere slow down of economic growth (which we don't even know since it's notoriously hard to measure). As late as 1985 motor vechiel production in USSR was still increasing, and it started decreasing as Gorbachev's reforms kicked in.

Anyway, the point is that USSR's economy was mostly "fine" and developing up until Gorbachev's reforms. Gorbachev's reforms hobbled what was otherwise a fairly productive economy, and the horrific politics killed all government legitimacy which resulted in the collapse.

It wasn't because the economy suddenly stopped working or was grossly uncompetitive with the rest of the world. That's just, basically, Western post-91 propaganda.