• Corruption: With prices determined by the central government rather than the market, consumer demand for many products outstripped supply. This discrepancy created economic opportunities for factory, warehouse, and shop managers responsible for producing or distributing these products. Referred to as “deficit” by the public, these goods could be either illegally sold for a higher price or quasi-legally bartered in exchange for other high-demand products and services with similarly well-positioned people. The system of personal and familial connections based on such barter exchanges could also be leveraged to secure various privileges, such as admission to a superior hospital or university, career advancement, or reduced production targets for an enterprise.


• Low quality of manufactured goods: In the absence of a free market where prices are dictated by consumer demand, government planners lacked a straightforward method to assess the quality of produced goods. Factory managers’ performance was primarily evaluated based on the quantity of output, incentivizing a sacrifice of quality for quantity.


• Egalitarian Pay System: A highly constrained salary range resulted in minimal difference in earnings between the least and most effective employees.

Declining oil prices

During the 1970s, the international oil prices experienced a six-fold surge, while domestic oil production in the USSR doubled due to the discovery of new oil reserves. This economic shift enabled the USSR to import substantial amounts of foreign machinery and consumer goods. From 1970 to 1985, the Soviet Union saw a significant increase in imports: clothing and footwear imports quadrupled, meat imports surged five-fold, and grain imports skyrocketed by a factor of twenty, accounting for about a quarter of domestic consumption.

However, after peaking in 1980, oil prices began a gradual decline, decreasing by approximately 50% over the next five years. In less than a year following the election of Mikhail Gorbachev, oil prices experienced another drastic drop of 50% within just a few months. As the value of Soviet exports plummeted, it became clear to the leadership that the country was in dire need of substantial economic reform.

Increasing U.S. military spending

Between 1969 and 1979, the US and USSR reduced mutual tensions through a series of diplomatic efforts known as Détente policies. Both countries signed the Helsinki Accords on security and human rights, concluded Strategic Arms Limitation Treaties, and organized joint space missions. As tensions eased, US military spending decreased from 8.6% to 4.9% of GDP. However, the USSR’s invasion of Afghanistan in 1979 and its disregard for human rights commitments led to waning US public support for Détente policies.

In the early 1980s, President Reagan initiated a large increase in U.S. military spending, including a plan for the new missile defense system (SDI), intended to make the US largely invulnerable to Soviet nuclear weapons. With a less productive economy, the USSR was already spending a much larger share of its GDP on its military and could not afford further increases. The Soviet government was thus faced with the choice of abandoning military parity with the US and superpower status or embarking on a radical course of political and economic reforms.

Past successes

Despite trailing the West economically, the USSR surpassed Western nations in several areas (winning the space race in the 1950s, securing the most Olympic medals, etc.). A major source of pride was the Soviet victory over Nazi Germany, which had previously defeated the combined forces of the French and British empires. Thus, when the economic situation deteriorated in the 1980s, the leadership did not interpret it as proof of socialism’s inherent inferiority. Instead, the problems were attributed to excessive mid-level bureaucracy which the government decided to fix by shifting more control to the people on the ground. To aid the people make informed decisions and expose various misdeeds of mid-level bureaucrats, the leadership introduced new “glasnost” policies that relaxed media censorship and restrictions on freedom of debate.

By the 1980s, Communist rule in Russia had been in place for seven decades. The new party leaders, having grown up without witnessing any significant opposition to the regime, were taken aback when the newly granted freedoms were used to challenge the very concept of Communist Party rule or to demand national independence in regions with a non-Russian majority. Following a period of internal deliberation on whether to placate the populace with additional concessions or to backtrack on the reforms, the party leaders eventually opted for the latter. However, this decision was made too late to salvage the regime.

The fate of the USSR stands in stark contrast to contemporary communist regimes in China and North Korea. Both countries were significantly less developed than the USSR, let alone the Western nations. Each also had a capitalist counterpart, the Republic of China (Taiwan) and South Korea, where the populations enjoyed substantially higher living standards. Given the more apparent disadvantages of the socialist system in these countries compared to the USSR, the local communist leaders were under no illusions about the necessity to maintain media censorship and permanently quash all political dissent.

Mikhail Gorbachev

History knows almost no examples of dictators voluntarily giving up or limiting their powers. Any other high-ranking party functionary elected to the post of General Secretary of the CPSU would almost certainly not have undertaken reforms that would have jeopardized his authority.