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The Collapse of the Soviet Union

Reeva Lalani

Soviet collapse exposed flaws in Marxist system (centralized control, ignoring supply/demand). Gorbachev's reforms aimed for market and political freedom, but caused economic hardship (scarcity, currency fears). Despite challenges, some areas adapted, and within 30 years, Russia's resilience has brought it back to world influence.

The ever-changing political landscape and broad public dissent against government power raise legitimate concerns over what can collapse a political system. A model exists to show the potential of enduring such a collapse in response to the dissolution of the Soviet Union in Russia.  


The Soviet Union applied Classical Marxism when the Bolsheviks took control of Russia in 1917—according to Murray Rothbard, disincentivizing because it rewards need at the expense of production. In "The End of Socialism and the Calculation Debate Revisited," Rothbard wrote in The Review of Austrian Economics in 1991.


If, for example, everyone under socialism were to receive an equal income or to produce "according to his ability" but receive "according to his needs," then, to sum it up in the famous question: Who, under socialism, will take out the garbage? That is, what will be the incentive to do the dirty jobs and to do them well? Or, to put it another way, what would be the incentive to work hard and be productive in any position? 


Rothbard further explained that beyond disincentivizing the productive wage-earning class, those who managed the "planned economy" of Soviet Communism lacked the understanding of supply and demand variables that are the foundation of free markets. Wrote Rothbard, "...the planning board could not answer questions because socialism would lack the indispensable tool that private entrepreneurs use to appraise and calculate." Rothbard says, "the existence of a market in the means of production...that brings about money prices based upon genuine profit-seeking exchanges by private owners...." 


Gorbachev's 2008 essay, "The Rise and Fall of Mikhail Gorbachev," states that Uri Maltsev, a Russian economist who worked on Soviet Premier Mikhail Gorbachev's economic reform team, validated Rothbard by discussing his experiences of growing up in the Soviet Union. In Maltsev's eyes, financial plans were "…lacking the ability to see a production process through to the ends that consumers desire, Soviet socialism produced only military hardware, useless goods to make other goods, while consumers were deprived of bare essentials." 


Maltsev credits the eventual collapse of Soviet Communism to the market and political expression reforms that Gorbachev attempted to rescue the Soviet system. "It was a Western Fantasy that the man named to be general secretary of the Communist Party (Gorbachev) would not be a devoted Communist…." Therefore, Maltsev continued, "Gorbachev too tried to save Communism through other means. That was the original point behind glasnost and perestroika." 


Gorbachev's political reforms developed an environment that challenged the political authority of the Soviet Communist Party and eventually gave rise to political opposition that was personified by Boris Yeltsin, who rose to become the first president of the Russian Federation. Yeltsin oversaw the eventual collapse of the Soviet Union on Sunday, December 26, 1991, from political turmoil caused by the failures of Communism and the recognition of those failures within the Communist Parties in the member nations of the Soviet Union.    


The collapse of the Soviet Union did not magically transform Russia into a market paradise but brought challenging times to Russians. "I remember sensing that society got disoriented all of a sudden," wrote one Russian citizen recently, "Some, who were in upper echelons, got a sense of direction faster than the others. Those of them who were quicker became richer and richer overnight. The overwhelming sense that I felt and still remember was that everyone got disoriented, disillusioned, and frantic."  


At the time of the Soviet collapse, residents of Russia speak of the fear and desperation of the currency collapse and scarcity of necessary goods such as food. In 1990, a shortage of consumer goods began, which fueled inflation and sent the economy into a tailspin. As the store shelves became empty, hyperinflation began to make the currency useless, despite meager monetary reforms. However, amid turmoil and despair, a former Russian resident said, "...some of the autonomous republics' life was more normal. They had their local government, their own strict norms and traditions, and religion which kept the semblance of order."  


Even though food and clothing supplies were scarce due to supply chain disruptions, people adjusted quickly. Those in the rural areas had grown their food, expanded their livestock production, and began businesses by providing for the demand for food. Cottage industries of home sewists started to meet the demand for clothes. 


The humble work and production of Russian people struggling to survive the collapse of Soviet Communism have resurrected Russia to the stage of world influence in just 30 years. Wisdom can be served by recognizing the work devoted by its citizens to keep Russia alive through the collapse of the failed system that oppressed them for 70 years rather than confronting the political leaders of the Russian Federation. 

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