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1964-1982 - The Period of Stagnation

Leonid Brezhnev was made First Secretary of the CPSU Central Committee in 1964, and the Soviet economy entered a period of stagnation from which it never recovered. The years after Khrushchev were notable for the stability of cadres in the party and state apparatus. A cadre was a party member who holds a responsible position (usually administrative) in either the party or the government apparatus. In a more restricted sense, a person who has been fully indoctrinated in party ideology and methods and uses this training in his or her work. By introducing the slogan "Trust in Cadres" in 1965, Brezhnev won the support of many bureaucrats wary of the constant reorganizations of the Khrushchev era and eager for security in established hierarchies.

There was a decrease in the influx of new manpower to the national economy due to a 25% decrease in the birth rate and an increase in mortality by 15% between 1960 and the late 1970s. This was accompanied by a change in the structure of employment of workers in favor of the service sector at the expense of agriculture. Until the late 1950s, the overwhelming majority of the urban population (about 70%) was employed in industry, construction and transport. In most cases, the types of work performed did not require high qualifications and were quite up to yesterday's peasants, who, having become workers, continued to engage in manual labor.

There was a contradiction between the emerging socio-professional structure, suited to the needs of the scientific and technological revolution, and the system of production relations established in the past technological era, and the state did its best to keep the former in the framework of the latter.

The traditional criminal world began to become intertwined with the economic or white-collar criminals of the shadow economy and with the party bureaucracy. With the rise of the "comrade criminals" in Russia, "the black marketeers of the 1960s and 1970s crossed the line dividing the underworld and the state. They operated in easy and mutually profitable cooperation with Soviet bureaucrats. This intertwining reflected the pervasive nature of corruption during the "period of stagnation" under Soviet leader Leonid Brezhnev (1964-82). Government and party officials left no stones unturned in seeking opportunities to line their pockets. One such opportunity was extorting money from the criminal world and the shadow economy in exchange for protecting their illegal operations.

Despite Khrushchev's tinkerings with economic planning, the economic system remained dependent on central plans drawn up with no reference to market mechanisms. Reformers, of whom the economist Evsei Liberman was most noteworthy, advocated greater freedom for individual enterprises from outside controls and sought to turn the enterprises' economic objectives toward making a profit. Prime Minister Kosygin championed Liberman's proposals and succeeded in incorporating them into a general economic reform program approved in September 1965. This reform included scrapping Khrushchev's regional economic councils in favor of resurrecting the other central industrial ministries of the Stalin era. Opposition from party conservatives and cautious managers, however, soon stalled the Liberman reforms, forcing the state to abandon them.

The Eighth Five Year Plan (1966-1970) was a period of political and economic awakening with respect to the need for expanding the planning capability of the USSR. Soviet economic planners were increasingly distressed by falling growth rates and the rising percentage of nonproductive (ie, clerical) workers. They were also having trouble controlling the sheer immensity and complexity of the economy. During the second half of the 1960s, there were two streams of though in the leadership. One was represented by Brezhnev, an advocate of limited decentralisation and a backer of the administrative management of the economics. The second one was personalised by Kosygin, who urged more radical and drastic steps towards economic reform with a stress on the market. Heavy industry grew rapidly through the 1960s, especially in fuel and energy branches. But this growth was followed by a prolonged slowdown beginning in the late 1960s.

Under the ninth Five Year Plan (1971-1976), for Brezhnev the priorities were agriculture, basic industry, and defense, while Kosygin was focused on light industry. But from one five-year plan to another the main economic figures fell down. Successive five-year plans resulted in no substantial improvement in the growth rate of industrial production.

The Tenth Five-Year Plan (1976-1980), approved by the XXV Communist Party Congress in February 1976, represented the ascendency of Brzhnev over Kosygin. It named the main priorities of the government policy as development of the defense industry, energy, agriculture and Siberia reclamation. The dramatic shift in the agricultural balance of power between the US and Soviet Union had been decades in the making. But contrasting food surpluses and deficits had been highly visible only in the 1970s. As recently as 1970 both countries were exporting grain - the US 38 million tons and the Soviet Union eight million tons. By 1981, however, US grain exports had humped to a staggering 115 million tons and the Soviets were importing 43 million tons.

The Eleventh Five-Year Plan (1981-85) was released a year late at the November 1981 meeting of the Central Committee of the Soviet Communist Party. General Secretary Leonid Brezhnev said food was the central problem of the whole Five-Year Plan. As the deterioration of Soviet agriculture continued, the need to import food became even greater. By 1982 the flow of grain from the US to the Soviet Union was on the verge of being the largest ever between two countries, about to eclipse the current US flow to Japan. The long line of ships that now connects American farms with the dining tables of the Soviet Union constituted a new economic tie between the two countries.

In industry, plans stressed the heavy and defense-related branches, with the light consumer-goods branches slighted. As a developed industrial country, the Soviet Union by the 1970s found it increasingly difficult to maintain the high rates of growth in the industrial sector that it had sustained in earlier years. Increasingly large investment and labor inputs were required for growth, but these inputs were becoming more difficult to obtain. Shortages of consumer goods abetted pilferage of government property and growth of the black market. Vodka, however, remained readily available, and alcoholism was an important factor in both the declining life expectancy and the rising infant mortality that the Soviet Union experienced in the later Brezhnev years.

n the second half of the 1970s, the isolation of all state affairs on one already sick man led the country into a blind alley. Her life problems either were endlessly postponed, or fell into the category of unsolvable in general. The pace of economic growth continued to fall, labor productivity at times inferior to developed countries. The low quality of the products negated the huge costslabor and resources. Deficiency of agricultural products and many other goods has become a serious social problem. The living standard of the population, slowly growing until the mid-1970s, stagnated and began to fall. Significant foreign exchange earnings from energy exports (more than half of USSR exports by 1981) were absorbed mainly by the military-industrial complex.

Brezhnev's authority suffered from corruption scandals in his entourage, rumors circulating everywhere, from "mania" awards (including self-awards) for real and imaginary services, on the occasion of anniversaries and birthdays. Propaganda of "successes" and "advantages of socialism" against the backdrop of growing negative tendencies turned into the spread of doublethink and cynicism in the public consciousness, provoked a deafening protest. While supporting the struggle against the growing dissent movement, Brezhnev, however, held moderate positions (for example, he spoke out against the trial of AI Solzhenitsyn, but for expelling the writer abroad).

At the same time, in the first years of Brezhnev's leadership, the rehabilitation of victims of Stalinist repressions was curtailed. Although Brezhnev himself from the late 1970s was actually unable to rule the country, the system of power that he created continued to function. The state entered a stage of stagnation, more and more significantly lagged behind countries that had understood the new demands of the scientific and technological revolution on time. The former economic model of the superplan economy was exhausted. Increased moral, political and socio-economic - in fact systemic - the crisis of Soviet society.

The crisis of the organization of labor was marked by the inhibition and failure of incessantly reshaped reform, as well as the conservative policy of the ruling elite, which some regarded as "neo-Stalinism." Undoubtedly, this was decisive in the crisis. In 1983 Academician T. Zaslavskaya pointed out in her famous "Novosibirsk report" (which at that time was only heard at closed meetings of the Academy of Sciences and at party meetings, and then "secretly" got to the West). According to T. Zaslavskaya and her colleagues (the majority of whom were united around the Eco magazine published by the Novosibirsk Institute of Economics and Industrial Production), the root of the crisis was rooted in the inability of the existing system to ensure the effective use of human resources and the intellectual potential of society.

The System remained essentially the same itself, as it did in the 1930s, despite the reforms carried out after Stalin's death: excessive centralization, directive planning, the absence of market pricing and organization of the use of resources, the control of all methods of material stimulation of workers by the center, the restriction or simply prohibition of all types of individual labor activity of the population in production, services, trade. This concealed the fundamental flaw of the system as a whole: workers could count only on activities in the public sector. Any personal initiative was considered illegal and related to a shadow economy that was not officially recognized, no matter how economically useful it was. The public sector was also completely unreceptive to the individual creative initiative of the working people.

Equally important in undermining material interest was the constant shortage of goods, making a senseless desire for higher earnings. The dizzying growth of savings in savings banks was a convincing testimony to the impossibility for the vast majority of the population to satisfy their needs.

General Secretary Gorbachev severely criticized economic policy and performance under Brezhnev, repeatedly referring to the late seventies and the early eighties as a period of stagnation, a precrisis situation, or a period of growing contradictions.

The reforms under Gorbachev aimed to overcome the slow but steady degeneration of the Soviet system, which created a crisis for the Soviet leadership less because it endangered the system itself than because it endangered their geopolitical strategy. For their strategy rested on the belief that the Soviet system was, in all key respects, better than any other. The belief was severely challenged when they compared the degenerating Soviet system with the West. It was the contrast with the West that forced the leadership to see that a change of tactics was needed to protect and promote their strategy of change that was difficult and even revolutionary from their standpoint.

Gorbachev estimated in his February 1987 plenum speech that the average annual increment in Soviet national income would have declined in the early 1980s if the influence of higher world oil prices and accelerated domestic retail sales of alcohol were disregarded. In doing so, he ratcheted up the contrast between economic performance in the Brezhnev "stagnation" period and performance under his tenure. He said in effect that the Soviet economy was on the way to decline in the early 1980s but for the in?uence of luck (higher world oil prices) and wrong-headed policy (accelerated retail sales of alcohol).

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