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THE SOVIET UNION OF THE 1980s had the largest centrally directed
economy in the world. The regime established its economic
priorities through central planning, a system under which
administrative decisions rather than the market determined resource
allocation and prices.
Since the Bolshevik Revolution of 1917, the country has grown
from a largely underdeveloped peasant society with minimal industry
to become the second largest industrial power in the world.
According to Soviet statistics, the country's share in world
industrial production grew from 4 percent to 20 percent between
1913 and 1980. Although many Western analysts considered these
claims to be inflated, the Soviet achievement remained remarkable.
Recovering from the calamitous events of World War II, the
country's economy had maintained a continuous though uneven rate of
growth. Living standards, although still modest for most
inhabitants by Western standards, had improved, and Soviet citizens
of the late 1980s had a measure of economic security.
Although these past achievements were impressive, in the mid1980s Soviet leaders faced many problems. Since the 1970s, the
growth rate had slowed substantially.
Extensive economic development (see Glossary), based on vast
inputs of materials and
labor, was no longer possible; yet the productivity of Soviet
assets remained low compared with other major industrialized
countries. Product quality needed improvement. Soviet leaders faced
a fundamental dilemma: the strong central controls that had
traditionally guided economic development had failed to promote the
creativity and productivity urgently needed in a highly developed,
Conceding the weaknesses of their past approaches in solving
new problems, the leaders of the late 1980s were seeking to mold a
program of economic reform to galvanize the economy. The Basic
Directions for the Economic and Social Development of the USSR for
1986-1990 and for the Period to the Year 2000, a report to the
Twenty-Seventh Party Congress in March 1986, spoke of a "burden of
the shortcomings that had been piling up over a long period," which
required "radical changes, a profound restructuring." The
leadership, headed by General Secretary Mikhail S. Gorbachev, was
experimenting with solutions to economic problems with an openness
glasnost--see Glossary) never before seen in the history of
the economy. One method for improving productivity appeared to be
a strengthening of the role of market forces. Yet reforms in which
market forces assumed a greater role would signify a lessening of
authority and control by the planning hierarchy.
Assessing developments in the economy, both past and present,
remains difficult for Western observers. The country contains
enormous economic and regional disparities. Yet analyzing
statistical data broken down by region is a cumbersome process.
Furthermore, Soviet statistics themselves may be of limited use to
Western analysts because they are not directly comparable with
those used in Western countries. The differing statistical
concepts, valuations, and procedures used by communist and
noncommunist economists make even the most basic data, such as the
relative productivity of various sectors, difficult to assess. Most
Western analysts, and some Soviet economists, doubt the accuracy of
the published statistics, recognizing that the industrial growth
figures tend to be inflated.
Data as of May 1989