The Breakdown of the Soviet System

The Soviet system's protracted economic slowdown and growing “malaise,” treated at the beginning of Mikhail Gorbachev's perestroika as correctable deficiencies, started from the late 1980s to be viewed increasingly as incurable diseases of the all-embracing party-state order. In the ensuing uncharted, chaotic processes of disintegration of the Soviet system, begun in the early 1990s, the decaying USSR was sucked into the whirlpools of its dislocated state machine and dissolving multinational empire. At the time, no compelling, conclusive analysis could be effectively carried out with regard to the policy choices between a so-called shock therapy – involving a simultaneous resort to rapid price liberalization, economic stabilization, and privatization – and a gradualistic process involving various preliminary combinations of legislative and restructuring measures. The passage from the decomposing centralized administration to a new economic order indeed proved largely uncontrollable and treacherous. The rapidly sinking central power was leaving behind it resilient centers of power in key positions in industry, banking, and the agricultural collectives, letting them expand their connections with the “shadow economy.” Conflicts between various still functioning government organs and their contradictory legislative decisions, and a crisscrossing of more or less spontaneously emerging trade and commercial relations, made the entire socioeconomic organism drift aimlessly.

Before presenting some of the important highlights of 1990 and 1991 – the last years of the dislocating Soviet party-state – let me recall briefly the predicaments of the Soviet economy at the end of the 1980s.