Friday, November 21, 2008

Gorbachev, Obama and the end of USSR

This is a response to the following blog post on Lex Libertas:
Gorbachev Urges Obama to Carry Out Perestroika
You are talking about the downfall of the Soviet Union like it was a bad thing. The only people who think it was a bad thing are the Communists and the Russian nationalists.

I think it was a wonderful thing because it made liberty and democracy possible for tens of millions of people who were languishing in the Soviet system (Ukrainians, Georgians, the Balts, the 20-30 million slaves in the gulags.). Freedom is well worth the price of a decade of economic hardship following the collapse of communism. And Gorbachev was not necessarily to blame for it. The seeds of the Soviet system's collapse were planted long before the 1980s. (And much of the post-Soviet economic hardship was the result of post-Soviet government policies, and especially so in Ukraine, where the government kept printing money to meet its social obligations, jacking up inflation to 14,000% at one point, and causing the longest post-Soviet economic decline until the year 2000.)

The first seed of destruction, philosophically speaking, was in the beginning, when the entire system was founded on official godlessness and state socialism. But more to the point, Brezhnev (and Reagan) was responsible for the credit hole the Soviet Union was in. A lot of old Soviet citizens remember his senile rule with nostalgia, because sausages were cheap (read subsidized) and there was general internal peace in the empire. But this lifestyle was supported by the countless credits extended by Western institutions, which doomed the Soviet economic system to the 1990s-style downturns. If it wasn't for the West stupidly extending credits to the Soviet Union, it would have collapsed much sooner.

Another reason for collapse was the fact that Saudi Arabian monarchs performed a wonderful service for their American ally at the request of Reagan. Just like Russia today, the Soviet Union was an energy tiger. (So, in a sense this is nothing new.) The Soviet leadership was planning to rely on its energy might for economic stability and political influence in the world, as well as hard currency receipts. Reagan asked the Saudis to start pumping out significantly more oil (I think they doubled it), which collapsed the world price of oil, and undermined the entire Soviet strategy. Russia today is in the same place. The price of oil falls 3 times and the Russian market is down over 70%. (Something similar in Ukraine as well, with the price of steel down 4 times, the markets are down almost 70% now.) Pretty predictable, really. Another "problem" was his anti-alcoholism campaign, which deprived the Soviet central government of significant revenues. The Russian government today is relying on these revenues to take them through the rough times. Sure, they are killing their people with alcoholism and lowering the life expentancy of Russians even further, but at least they are ensuring the excise tax revenues are coming in.

Blaming the collapse of the USSR on Gorbie is at best disingenuous, unless you believe communism and repression is a good thing, and certainly not the whole story. It was inherent in the illiberal system itself. As soon as Gorbie allowed the Soviet people to breathe a little more freedom, the Balts and the Georgians demanded their independence, and were met with some violence. Certainly not in the hardline Soviet style, but there were tanks on the streets in their Republics. The rest of the Soviet system held together, until Yeltsin went around Gorbachev's back, and while demanding the independence of Russia from the Soviet Union, met with his Belarusian and Ukrainian counterparts in Belarus in 1990, sealed an agreement with them and officially declared the end of USSR. The Ukrainian (Communist!) parliament immediately voted for independence. And a year later, in 1991, the Ukrainian people confirmed in a referendum by a vote of 96% (including a majority in Crimea!) that they wanted independence for Ukraine. That was the final nail in the coffin of the Soviet Union.

What you need to understand about Gorbachev is that he is a social-democrat, Western European style. What he wanted to do was to make the Soviet Union more like the rest of Western Europe, by changing it into a socialism with a soft face. This is precisely what he is asking Obama to do, to make the United States more like Western Europe. Needless to say, that would be bad, as most Western European economic growth rates are at 1-2% per year. Social democracy lowers economic growth by consuming productive capital that's needed for growth.

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