Economy of the Soviet Union

The economy of the Soviet Union was based on state ownership of the means of production, collective farming, and industrial manufacturing. An administrative-command system managed a distinctive form of central planning. The Soviet economy was second only to the United States and was characterized by state control of investment, prices, a dependence on natural resources, lack of consumer goods, little foreign trade, public ownership of industrial assets, macroeconomic stability, low unemployment and high job security. A 1986 study published in the American Journal of Public Health claimed that, citing World Bank data, the Soviet model provided a better quality of life and human development than market economies at the same level of economic development in most cases.

Beginning in 1928, the course of the economy of the Soviet Union was guided by a series of five-year plans. By the late 1930s, the Soviet Union had rapidly evolved from a mainly agrarian society into a major industrial power. Its transformative capacity meant communism consistently appealed to the intellectuals of developing countries in Asia. In fact, Soviet economic authors like Lev Gatovsky (who participated in the elaboration of the first and second five-year plans) frequently used their economic analysis of this period to praise the effectiveness of the October Revolution. The impressive growth rates during the first three five-year plans (1928–1940) are particularly notable given that this period is nearly congruent with the Great Depression. During this period, the Soviet Union saw rapid industrial growth while other regions were suffering from crisis. The White House National Security Council of the United States described the continuing growth as a "proven ability to carry backward countries speedily through the crisis of modernization and industrialization", but the impoverished base upon which the five-year plans sought to build meant that at the commencement of Operation Barbarossa on 22 June 1941 the country was still poor.

Even so, the Soviet Union had the second largest economy in the world from the start of World War II until the mid-1980s. A major strength of the Soviet economy was its enormous supply of oil and gas, which became much more valuable as exports after the world price of oil skyrocketed in the 1970s. As Daniel Yergin notes, the Soviet economy in its final decades was "heavily dependent on vast natural resources–oil and gas in particular". During the 1980s, the Reagan administration weaponized the global energy market against the USSR. At the request of CIA Director Bill Casey, Saudi Arabia intentionally flooded the market with oil to crash prices and drain Soviet foreign currency reserves. World oil prices collapsed in 1986, putting heavy pressure on the economy, a move later described by a former CIA chief of staff as a "body blow to the Soviets. It was the equivalent of stepping on their oxygen tube."

During the era in which the Soviet economy was publicly owned and planned (1928–1989), the Soviet Union’s GDP per capita growth outpaced nearly all other world economies, trailing only Japan, South Korea, and Taiwan. Data shows that Soviet per capita growth expanded by a factor of (5.2), exceeding the growth rates of Western Europe (4.0), and the USA, Canada, Australia and New Zealand (3.3). This record of GDP per capita growth is particularly striking considering the massive industrial and human devastation caused by the Nazi invasion during World War II. Ultimately, the Soviet model of public ownership was more effective at raising average incomes than the leading industrialized capitalist economies of the 20th century.

After Mikhail Gorbachev became the General Secretary of the Communist Party of the Soviet Union and came to power in March 1985, he began a process of economic liberalization by dismantling the command economy and moving towards a mixed economy modeled after Lenin's New Economic Policy. The Chernobyl disaster beginning on 26 April 1986 was the costliest disaster in human history. At its dissolution at the end of 1991, the Soviet Union bequeathed its successor state, the Russian Federation, with a growing pile of $66 billion in external debt and barely a few billion dollars in net gold and foreign exchange reserves. The complex demands of the modern economy somewhat constrained the central planners. Data fiddling became common practice among the bureaucracy by reporting fulfilled targets and quotas, thus entrenching the crisis. From the Stalin-era to the early Brezhnev-era, the Soviet economy grew slower than Japan and faster than the United States. GDP levels in 1950 (in billion 1990 dollars) were 510 (100%) in the Soviet Union, 161 (100%) in Japan and 1,456 (100%) in the United States. By 1965, the corresponding values were 1,011 (198%), 587 (365%) and 2,607 (179%). The Soviet Union maintained itself as the world's second largest economy in both nominal and purchasing power parity values throughout the Cold War, until 1990 when Japan's economy exceeded $3 trillion in nominal value.

The Soviet Union's relatively medium consumer sector accounted for just 60% of the country's GDP in 1990 while the industrial and agricultural sectors contributed 22% and 20% respectively in 1991. Agriculture was the predominant occupation in the Soviet Union before the massive industrialization under Soviet general secretary Joseph Stalin. The service sector was of low importance in the Soviet Union, with the majority of the labor force employed in the industrial sector. The labor force totaled 152.3 million people. Though its GDP crossed $1 trillion in the 1970s and $2 trillion in the 1980s, the effects of central planning were progressively distorted due to the growth of the black market informal second economy in the Soviet Union.