The Economy of the Soviet Union

[Music] this is the union of socialist Soviet republics or as it's better known the USSR or the Soviet Union this is one of the most historically significant economies to understand not only because it was the home to some of the most controversial economic practices ever not only because it was the nation that altered world politics for the later half of the entire 20th century or because it was home to the largest and most rapid economic declines in modern history no no all of that stuff is important and we will explore it but more important than all of that is that even today almost thirty years after the fall of the Soviet Union the lessons of the nation and its economy are having lasting implications on the world today of course the first thing to know when looking at the economy of the Soviet Union is that it was a socialist nation in fact it was the socialist nation - the time was a bit of an untested system Russia in 1917 was a very very unequal place defined by a class system of Royals officials and everyone else we have explored wealth inequality just last week when we looked at South Africa which is today the most uneven nation on earth but South Africa looks like Disneyland compared to the Russian Empire in the early 20th century people eventually got pretty tired of this having to both fight in World War one to protect a country that wouldn't feed them was looking pretty unfair and it was right ground for influential leaders to suggest that the proletariat masses fight the real enemies to seize the means of production which as a side note is a saying very very much rooted in economics to produce anything there are the factors of production land labor and capital the Marxist theories that drove the revolution pointed out that a vast majority of the population controls an equally vast majority of the labor which makes sense people equal labour but what define the ruling class is that they own the lands and the factories the land and capital part of this equation there is nothing stopping the labor from seizing these assets for the people and then tada we control the whole system Tsar Nicholas old mate we don't really need you anymore this was a pretty tumultuous time in Russian history there were civil wars and world wars and power vacuums and all of this of course led to huge social and economic unrest from the proverbial ashes this man eventually rose to a position of undisputed power Joseph Stalin looked to many like the strongman the nation needed to restore order a common misconception was that the Russian Revolution happened and then the country just got straight into some good old socialism but in reality the nation didn't really start to take the shape that Karl Marx of Vladimir Lenin had envisaged until 1928 a full four years after the death of Lenin it was at this time that Joseph Stalin enacted the first of a series of five-year plans something that was the cornerstone of most centrally planned socialist states into the future we saw it in China we still see at North Korea and we even saw it in India but Soviet Russia was of course the birthplace of these systems the first of the five-year plans called for a strict focus on heavy industry and particularly food production Stalin was very well aware of what a hungry population meant for the last rules of Russia and was not keen to repeat their mistakes the five-year plan set out relatively ambitious targets that monitored every aspect of the production cycle inputs to outputs wholesale to retail prices and even time frames for three-point this caused a few issues for starters the whole system was plagued with been overly optimistic of potential output and similarly mired by misreporting of all figures there was a lack of real oversight amongst workers two managers two leaders and everyone was too afraid of stepping out of line if you are a worker discipline your manager well that's not gonna look great for you but similarly it is hard to punish a worker because they were the foundation of the socialist nation the term Soviet is actually just a Russian term for workers Council or basically a workers union a system that worked better was just a lie about your actual output figures on all levels to meet the bare minimum criteria and everyone just kind of agreed to go along with his lie because it suited people throughout all stages and at all levels of the production cycle to keep the lie going so as to not get gu logged now another big flaw in this whole system that is often pointed out is the lack of incentive to put any kind of discretionary effort into your work a typical limitation of Marxist Leninist social systems is that it doesn't offer much in the way of motivation to be a more productive worker or manager or business at the end of the day resources will be allocated upon needs by the state and your own discretionary effort has little to do with what you receive most people should be able to understand this but what most people miss is that this problem isn't necessarily exclusive to a socialist system most workers in developed countries are salaried employees that receive a base wage and perhaps a bonus on top of that for hitting certain targets the same as in the Soviet Union there is little incentive for people to put in any more effort than they need to in order to just not get fired this has led to a phenomenon where a lot of workers are idle for a vast majority of their working hours like maybe you are right now watching this video so yeah lazy unmotivated workers are a thing in socialist nations no doubt but they are also a thing in capitalist nations as well no major differences they're something that does make a difference though is perhaps something that is more of an oversight for most people assessing socialist States and that is the vast mismanagement of resources that are allocated with the guidance from political ideologies rather than economic theories remember Stalin's economic plans that monitored import and output and all that jazz well the reason the government did this were twofold one to assess if their plan had been successful but to also to allocate resources to underperforming industries if farming was only able to produce a million tons of potatoes in a given year and they were supposed to produce 2 million tons the Communist Party would just allocate double the workers double the fertilizer and double the farmland to produce twice the output and normally this kind of worked but it was looking at everything kind of backwards the Soviet Union had decided that they wanted an X amount of output and didn't care what they needed to put in to the other side of the equation to make that level of output happen and this made sense politically the Soviet Union was a place where results were achieved by putting things to work whose supreme leader of the Communist Party promised potatoes by golly you're getting those damn potatoes the whole system reminds me a lot of that old TV show MythBusters where they tested scientific theories through very tv-friendly experiments like getting sold cement out of a cement truck with the stick of dynamite if the actual findings were too underwhelming for TV they would do a segment called replicating the results which normally meant piling up an ungodly amount of high explosives and turning a small portion of Southern California into a crater it's not really good science but it does make everyone feel good the same is true for the Soviet Union in a sense if the results were not impressive enough to present to the people of the nation they would just throw a huge amount of resources and labor at the problem until it got to a point where the desired results were achieved it's not really good economics but it does make everyone feel good this in and of itself meant that a lot of resources were wasted in fields and industries that just would not have existed in a normal competitive market but it also went beyond this imagine you were an ambitious and morally ownerís Soviet middle management type you could run your factory very efficiently using the bare minimum of resources to produce the maximum output and maybe be rewarded with a pat on the back but rest assured in the next five-year plan you are only going to be allocated the bare minimum of resources again and you are still going to be expected to produce the same if not more what is a smarter strategy is just to be really really inefficient waste resources let your workers idle below capacity and be proud of falling below quotas what this will mean is that in the next five-year plan you will be given more workers in a bigger Factory and more resources and you will look like a hero when you slightly increase the output from the last underperforming year this is a dangerous balancing act you want to get it just right because if it becomes too obvious what you are doing it's off to the gulags with you this whole issue of deliberate under performance or budget overuse is actually a huge issue in the public sector today it is extremely common for government agencies to find any way to spend up the last little bits of their budget because they know if they don't use it this year it will be taken off them next year so you are almost forced to use it the only difference was that in the Soviet Union the public sector was every sector so this issue of resource mismanagement was much more widespread the problem with asset allocation didn't stop there though this was almost a surface level issue in comparison to the Soviet Union's obsession with the accumulation of capital resources the whole sees the means of production thing has become a bit of a meme in recent years but it is important to remember that giving labour control over the machines that they worked on was a cornerstone of the Soviet system and this featured heavily in their five-year plans remember when I said politics got in the way of sound economic decisions well this is probably the area where this is most pronounced the Soviet Union allocated a vast majority of their productive capacity into producing more tools to increase their productive capacity which basically put meant they would rather produce drill presses rather than kettles the former increased potential economic output but the latter increases quality of life and standards of living x' for the residents but the soviet union was obsessed with paper growth and so much preferred to produce things that would go on to produce things this meant that the economy was growing but it kind of just gave workers more machinery than they really needed without really improving quality of life this led to famines and political unrest but what it did mean was that they could turn around and produce a lot of industry intensive goods if they needed to which they needed to during World War two the USSR was actually the nation most heavily affected by World War two losing around 27 million lives as a result of the war but it was still a worthy adversary due largely to its sheer productive potential I always stress that I am NOT a military historian so take everything I say here with a grain of salt but towards the climax of the war during the Battle of Kursk the largest tank battle in history the Soviets were victorious over the Germans purely by virtue the fact that they could bring thousands more tanks into the engagement the Soviet tanks were massively inferior to the German tanks but they won by sheer volume alone which is really a metaphor for the whole Soviet system in a nutshell after the death of Stalin a series of Soviet leaders began to enact increasingly liberal economic policies that lent more towards seeing the citizens of the nation as consumers rather than just workers the production of aweful factory equipment was replaced with the production of awful cars in an attempt to increase living standards but the soviet union was still be poster child for a Marxist Leninist economic system and it was difficult for them to depart too far from these roots as a result of this and an increasingly expensive cold war the citizens of the union saw very little in the way of economic growth and prosperity inefficiencies continue to Mar the nation and the select group of other nations that the Union could trade with kind of all had the same issues curiously enough up until its downfall in 1991 the Soviet Union was still the second largest economy in the world by GDP figures but that was not truly indicative of the state Russia had a huge population and it could juggle a lot of money around which looked great on paper GDP figures but it was a nation on its knees that could barely feed the laboring giant it had become the policy of quantity over quality could only get them so far and eventually they crumbled from the inside the Soviet Union was of course a hugely influential nation but the errors and issues that caused its downfall are important to understand for all sorts of arguments that are relevant to this day the failings of the Soviet Union are often the centerpiece of an argument to discredit socialist policies in developed nations but it is important to understand that these failings were not so much an issue of social welfare they were the misalignment of political ideologies with good economic theory slack labor and the lack of worker motivation exist just as much in modern capitalistic states as it does in a communist one but on the other hand the failings still must be recognized for what they are rewarding underperforming industries with more resources is a surefire way to produce more underperforming industries while an economy does not need to punish mediocrity in order to be great it cannot punish greatness or it is going to end up being mediocre regardless of the brand of politics you slap on it hi guys I hope you enjoyed the latest video a huge thank you to our new patrons over on patreon your support continues to make this channel possible otherwise as always YouTube live stream over on the second channel for the Q&A session so hop on over there or join our discord server if you would like to participate in that otherwise if you enjoyed this video please consider liking and subscribing really helps out thanks guys bye

Channel: Economics Explained

Views: 1,058,923

Rating: 4.7035413 out of 5

Keywords: the economy of the soviet union economics explained, the economics of the soviet union, the economy of the soviet union explained, the economy of soviet russia, the economics of soviet russia, the economics of the soviet union explained, soviet union economics explained, soviet russia economics explained, joseph stalin economics explained, the economics of joseph stalin, the economics of socialist soviet union, soviet union economy explained, economics explained

Id: S3Jkqqlpibo

Length: 15min 32sec (932 seconds)

Published: Sun Jan 26 2020

Reddit Comments

[u/Fausto_Rodeios]

Hi Comrade, love your videos. Only very recently have I felt identified with Communism at an ideological level, which means I‘m far from having any deep understanding about Marxist Philosophy or about the contributions of any particular Marxist figure.

Therefor I'm still faraway from assuming any specific ideological position inside communism.

My first contact with the Reddit Communist community was through r/communism, a subreddit from which i was permanently banned due to my understandable, newcomer ignorance of the many forms of Communist ideology, and the very specific set of ideals that r/communism represents.

Anyway, along with the ban from r/communism, i‘ve been banned from messaging the mods, and most importantly, i’ve been permanently banned from r/communism101.

As i’ve said, i‘m still not knowledgeable enough on Communist ideology to identify myself as an Marxist-Leninist, and therefor r/communism is probably not my place for the time being.

On the other hand, r/communist101 purpose is inherently different - each one teaches one - an place where newcomers (new comrades like me) , are granted an voice, the freedom to question and learn without being judged or subjected to clear cases of gatekeeping abuse from part of the mods.

To conclude, in one of your videos I’ve discovered that you created r/communism101, therefor i would like to ask you to intercede on my behalf, and unban me from r/communism101, for i‘m full of questions and it seams like an great place to get some answers, if only i could.

Thanks and keep with your good work.