Did the USSR really fail because Saudi Arabia ramped up oil production in 1985 (supposedly at President Reagan’s behest), thus collapsing oil prices and forcing Moscow into bankruptcy? Color me skeptical:
As a result, the Soviet Union lost approximately $20 billion per year, money without which the country simply could not survive.
$20 billion sounds like a lot, but for a country the size of the USSR, that really isn’t very much money. While it is undoubtedly true the oil readjustment negated much of the oil revenue the Soviet Union had enjoyed since the OPEC embargo in 1973, I have a hard time believing that oil prices alone—even as something of a tipping point—is what pushed the USSR over the brink.
Furthermore, debt alone couldn’t have collapsed the USSR—even before its collapse in 1991, debt was only about 20% of GDP. In 2004, the U.S.’s debt was 38% of GDP, which was still below the 40% debt incurred after World War II. Many other non-collapsing countries have debt ratios that are far worse—Jamaica, for example, is proud to have reduced its debt to 133% of GDP.
I’m afraid the unfortunately-named Gaidar has fallen for a common fallacy: assigning complex phenomena singular or simplistic causes. In reality, the reason the USSR collapsed (a topic worthy of a far more involved discussion elsewhere) was a combination of factors: debt, overstretch, bad policy & poor planning, corruption, and deep resentment. Since debt was covered above, let’s just briefly look at the rest:
- Overstretch: in the 80′s, the Soviet Union was in the midst of the Afghan War. This was one of many proxy battles it fought with the U.S., and the combined impact likely depleted the government of resources and money that could have been used elsewhere to stimulate growth or encourage flexibility. Additionally, the game of brinksmanship played by President Reagan kept outside pressure on Moscow never to decrease defense spending, which surely had a further drag effect on the budget.
- Bad Policy & Poor Planning: Soviet planners made disastrous policy choices—from the Virgin Lands program, to the futility of supporting an entire society on slave labor in the gulags, to the sloppiness that resulted in the Chernobyl disaster, the USSR was replete with financially ruinous events that could have been prevented. The Communist system was fundamentally unsustainable.
- Corruption: this shouldn’t need much expanding upon, but outside Moscow everyone from police to border guards to troops were reknown for their corruption and susceptibility to bribes. Despite my pseudo-ambivalence from the other day, corruption has a horrendous drag effect on an economy.
- Deep resentment: As all the above factors coalesced in the late 80′s, the Soviets and their puppets in East Europe found it increasingly difficult to maintain the strict control of society needed to maintain the communist system. Widespread resentment in Europe combined with deep dissatisfaction over the negative turn of events resulted in what was essentially a spontaneous mass bloodless revolution (this is a gross simplification, but my meaning is clear). The failure of one regime cascaded across the Eastern Bloc and into the USSR itself, until all the communist governments were evicted.
I know I’m glossing over very interesting details, and I probably left a few factors out of the list. This isn’t meant to be an exhaustive list of factors that caused the USSR’s collapse, but rather it is meant to show that you cannot point the blame to any one factor. The collapse of the Soviet Union was a complicated affair, the result of many otherwise recoverable malaises hitting the country all at once, along with some fundamental societal weaknesses no one on the outside could really see—not some petty squabble over oil prices and a few billion dollars.