Economy of The Soviet Union - History - 1970–1990

1970–1990

Further information: Era of Stagnation, History of the Soviet Union (1964–1982), and History of the Soviet Union (1982–1991)

The Era of Stagnation in the mid-1970s was aggravated by the war in Afghanistan in 1979 and led to a period of economic standstill between 1979 and 1985. Soviet military buildup at the expense of domestic development kept the USSR's GDP at the same level during the first half of the 1980s. The Soviet planned economy was not structured to respond adequately to the demands of the complex modern economy it had helped to forge. The massive quantities of goods produced often did not meet the needs or tastes of consumers. The volume of decisions facing planners in Moscow became overwhelming. The cumbersome procedures for bureaucratic administration foreclosed the free communication and flexible response required at the enterprise level for dealing with worker alienation, innovation, customers, and suppliers. During 1975–85, corruption and data fiddling became common practice among bureaucracy to report satisfied targets and quotas thus entrenching the crisis.

Awareness of the growing crisis arose initially within the KGB which with its extensive network of informants in every region and institution had its finger on the pulse of the nation. Yuri Andropov, director of the KGB, created a secret department during the 1970s within the KGB devoted to economic analysis, and when he succeeded Brezhnev in 1982 sounded the alarm forcefully to the Soviet leadership. Andropov's remedy of increased discipline, however, proved ineffective. It was only when Andropov's protege Gorbachev assumed power that a determined, but ultimately unsuccessful, assault on the economic crisis was undertaken.

Comparison between USSR and US economies (1989)
according to 1990 CIA The World Factbook
USSR US
GDP (1989 - millions $) 2,659,500 5,233,300
Population (July 1990) 290,938,469 250,410,000
GDP Per Capita ($) 9,211 21,082
Labor force (1989) 152,300,000 125,557,000

However, with the ascent of Mikhail Gorbachev as General Secretary of the Communist Party and the economic reform during Perestroika, Soviet Nominal GDP rose sharply from $900 billion to $1.5 trillion in a period of five years. According to CIA estimates by 1989 the size of the Soviet economy was roughly half that in the United States of America. According to the European Comparison Program, administered by the U.N, the size of the Soviet Economy was 36% of that in the United States in 1990

Sector (Distribution of Soviet workforce %) 1940 1965 1970 1979 1984
Primary (agriculture and forestry) 54 31 25 21 20
Secondary (including construction, transport and communication) 28 44 46 48 47
Tertiary (including trade, finance, health, education, science and administration 18 25 29 31 33
Total 100 100 100 100 100

Read more about this topic:  Economy Of The Soviet Union, History