Era of Stagnation - Economy - Causes

Causes

One of the suggested causes of stagnation was the increased military expenditure over consumer goods and other economic spheres. Andrei Sakharov, the veteran dissident, claimed in a 1980 letter to Brezhnev that the increasing expenditure on the armed forces was stalling economic growth. However, David Michael Kotz and Fred Weir, authors of Revolution from Above: The Demise of the Soviet System, argue that militarisation cannot be the prime cause for the economic stagnation, as military spending had historically been high (17% of GNP in 1950) and had increased on par with economic growth without previously destabilising the economy.

During the 1973 oil crisis, economic growth in the rest of the world plummeted but the Soviet hard currency earnings grew as a result of oil exports. Following the crisis, overall economic activity decreased markedly in the Soviet Union, the Western Bloc and Japan, but in the Soviet Union it was much more pronounced. Ultimately, economic stagnation in the Soviet Union could only have been caused by internal problems rather than external.