The “Stagnation” of the 1970s – first half of the 1980s
The economic development in Ukraine in this period can be characterized by one word “stagnation.” The economy developed in extensive way in contrast to Western Europe, which developed in intensive way. The state gave plans to factories to fulfill. The workers did not have any wish to exceed state plans because in that case the plan quotas were often raised and next year the workers were supposed to work more to meet the plan obligations. Thus, the system discouraged hard work.
New technologies were rarely introduced as there was no competition, which could stimulate innovations. The quality of goods was low because of the same reason – the absence of competition. About forty percent of the work force was engaged in ВПК (military-producing-complex).6 The arms race with the United States consumed large part of the state budget. The cost of foreign aid to Soviet satellites (Cuba, Afghanistan, African socialist states, and Eastern Europe) added to the budget deficit, which was three times higher than that of the United States (1985).
The central planning system often looked very inefficient and even awkward. For example, the Kyiv power station repair facility received electric cable from the city of Kuibyshev in central Russia, even though a large factory was producing just such cable in Kyiv. Some historians say that such a policy was specially designed to tie different republics economically. Other historians doubt it and say that such awkward economic schemes are typical of a command economy.
The Soviet government spent too much on consumer subsidies for propagandistic purposes. State subsidies kept consumer prices artificially low. One government official noted, “The state pays four rubles, eighty kopecks for a kilogram of meat and sells it (to consumers) for one ruble, eighty kopecks.” From the 1960s to the start of the 1990s bread prices never increased. The subsidized price of bread was so low that many farmers fed bread instead of grain to their livestock because it was cheaper. Despite having more farmers than all of the industrialized West and Japan put together, the Soviet Union was forced year after year to spend precious hard currency to import Western grain. The state controlled agricultural complex was very ineffective. More than 30 percent of foodstuff rotted in state storehouses before it could reach consumers. Up to 40 percent of grain was lost during harvesting and transit. In contrast to state farms, peasants’ individual plots – ohorody (which had only 3% of the land) provided the agricultural market with 1/3 of meat, 1/3 of milk, 35% of fruit and 50% of eggs and potatoes. In general, Ukrainian peasants produced at their tiny plots a third of the total agricultural production of the republic.
The quality of medical service was poor, though free. Housing was cheap, but people had to wait for many years to get it. Food was cheap but it could not satisfy the demand. People, mostly women, had to spend hours each day in lines to get cheap products. In general, the life of a woman in Soviet times was harder than that of a man. The average Ukrainian woman worked full-time, took care of the children, and did most of the shopping (read: queuing).
One of the positive sides of the Soviet system was the absence of poverty. About 90% of the population had approximately the same living conditions. Foreign observers noted that the planned economy brought the Soviet population economic security, full employment, and a high level of equality. Or, in the words of one American analyst, “the state offered the people protection from ‘three evils of capitalism’: unemployment, inequality, and inflation.”
But full social equality was not reached anyway. The nomenklatura remained, as in the Stalin times, a privileged class. Their living standards were high. They lived in large apartments (sometimes with state maidservants) and could enjoy using special shops, sanatoriums, and hospitals. Their salaries were at least three times as much as those of ordinary people. The late 1970s were characterized by a growing apathy to propaganda. With the death of Stalin the Soviet society lost the fear of mass repressions; with the removing of Khrushchev from power it lost enthusiasm and romanticism. Cynical attitude to the traditional Soviet values was especially growing among the youth in the late 1970s and early 1980s.
In the early 1970s, the Soviet Union’s impressive rate of economic growth began to slow. Per capita income, which had grown at an average annual rate of 6 percent from 1966 to 1970, increased by only 1-2 percent in the years preceding Gorbachev (1980-1985). Thus, although command economy had reached remarkable results during the Stalin and Khrushchev eras (when extensive methods could be effective), it failed to advance the country into the next stages of technology. Industry and agriculture still used obsolete and wasteful production methods which kept the Soviet economy far behind that of the United States. The productivity of industry was 3.5 times lower than in the West; agriculture – 5 times lower. The Soviet leadership understood that serious reforms were necessary to avoid defeat in the Cold War with the United States.