International Economy in the 20th century

Soviet “golden age”  Graph says that in the early years of the soviet 5 year plan, economic growth was fast and rapid  During Bretton woods ( 50s to 70s), soviet growth averaged around 4-5% per year  Not Germany or japan fast but faster than the US and world average  Then started to decline after 1970s But some key differences  Share of employment in the industry continues to grow ( in US and Europe, falls- shift to services)  Early productivity decline ( absenteeism, alcoholism,etc)  Exports oil and guns, but otherwise “import led growth”  Kuznets describing what modern economic growth lookedliked o Continual sectoral change! o But soviet economy doesn’t do this because it shifts to manufacturing and just stats there where as western economie shift into services in the 80s, Soviet economy just stays in manufacturing like steel production o Although globally labor productivity has fallen, in the soviet union it starts falling sooner in the late ‘60s  Probably capturing diminishing returns from putting capital into heavy industry  Also captures how lack of market incenvtives undercuts the basis of labor producitivty in the soviet union  Stakhanovites might have been successful in a war time construct but by the ‘60s its not the case anymore when you aren’t getting any richer  High rates of absenteeism, alcoholism, shirking in the job,etc Winning the wrong race  1980 – USSR leads world production in : pig iron, rolled steel, refined nickel, tungsten one, cement, tractors, grain harvesters, woven woolen fabrics  US – leads world in : plastics, passenger automobiles, TV receivers, synthetic fiber and rubber, phosphate fertilizer Agriculture: Achilles’ heel  Grain production peaks circa 1963 and grain imports begin  1970 - total agricultural growth is around .9%/year  Trade implications?  Continual balance of payments problem This study source was downloaded by from CourseH on :06:23 GMT -05:00 USSr states  That the standard of living is much better even if economy is stagnant  By early 70s, there is continual improvement in the West but in the USSR it does not Soviets benefit from oil shock but  Export booms were good but by the 1970s the soviets are trying to prop up an entire communist world that is sick of communism and invasions of countries like hungary  By the 1970s the soviets are subsidizing many E European countries Bad Timing  Oil prices fall after 1979, exactly when Soviets began war in Afghanistan  “import led growth” becomes hard currency debt, exactly when debt crisis begins o By 1982, Poland and hungary join IMF and restructure debt o Weakest countries in soviet sphere have debt crises Reforms!  Structural similarity between Soviet reforms of 1980s and Yugoslav/Poland reforms of the 1950s, Czechoslvak reforms of 1960s: from direct control of production to indirect control through profit sharing between selected stakeholders o Andropov , tries anti truancy campaign plus limited pay incentives The Gorbachev movement  Simulatenous political and economic reforms  Perestroika ( 1986) : economic restructuring  Glasnost: 1988 , political openness