Soviet “Catch-up” Development Planned economy  Obliterate market forces  Pursue state-led rapid industrialization &feature=related

Soviet “Catch-up” Development Planned economy—feature 1  Public ownership (no private) Collective farms  Extracted grain, food crops  Role of coercion

Soviet “Catch-up” Development A staged photo (1921) extolling the virtues of agricultural collectivism. In reality, most peasants fiercely opposed this system in which they were forced to give up their own private farms and move to cooperatively owned and run farms, where a certain amount of each harvest was seized by the state. As a result of their opposition, several million peasants were killed.

Soviet “Catch-up” Development Planned economy— feature 1  Public ownership State-owned mines  Extracted coal, minerals

“Catch-up” Development Planned economy— feature 1  Public ownership State-owned factories

Soviet “Catch-up” Development Planned economy—feature 2  State-set prices (no free market forces) Artificially LOW (below market) prices  For raw materials  Grain, coal  (Note similarity to marketing boards under colonialism) LOWER costs for labor  Food was cheap Relatively HIGHER prices for industrial products  Made state industry “profitable”—by definition  Inputs (labor, coal, iron ore) cheap  Outputs more expensive

Soviet “Catch-up” Development Planned economy— feature 3  Planners’ preferences  NOT consumers’ preferences  Heavy industry with defense applications  NOT consumer goods

Soviet “Catch-up” Development 3 key features of planned economy  Planners’ preferences (not consumers’ pref’s)  State ownership (no private)  State-set prices (no free market forces)  Role of coercion

Soviet “Catch-up” Development How did the Soviet economy affect the average citizen?  No consumer choice  No chance to get rich,  Little socio-economic advancement

Soviet “Catch-up” Development How did the Soviet economy affect the average citizen?  But Security  national security  individual job security Relatively egalitarian Basic needs met  Important to understanding public reaction to “shock therapy”

The End of Soviet Rule and the Emergence of Post-Communist Russia Mikhail Gorbachev Communist true believer Last General Secretary of the Communist Party of the Soviet Union What motivated Gorbachev to initiate reform of the communist system? Mikhail Gorbachev

The End of Soviet Rule and the Emergence of Post-Communist Russia What motivated Gorbachev to initiate reform of the communist system? weak incentives lack of efficiency lack of innovation (graph)

The End of Soviet Rule and the Emergence of Post-Communist Russia Key elements in Gorbachev’s reform program Perestroika (economic restructuring) Glasnost (openness) Demokratizatsiia (limited democracy)  ultimately led to collapse of Soviet Union

Introducing post-Soviet Russia New Russia (Russian Federation)  Elections, but “Not Free” (Freedom House)  HDI rank—65 th 2004 GDP < 1989 GDP Now, Putin’s Russia