7 Developing crisis of the socialist economical and political systems
7.1 Problems of the oil industry
Oil production, millions of tons:
In 1991 22,000 oil wells did not work because of the insufficient supply of equipment.
7.2 Political credits
Ever since the USSR refused to pay the debts of the tsarist government, Soviet Union always payed in time. However, since 1988 banks do not trust USSR anymore. It's getting more and more difficult to pay debts by taking new credits. USSR increases sales of gold, but the reserves are not too large. Under politicla liberalization, strict stabilization measures are threatening with a political crisis. The only solution the Soviet leaders can think of is the credits from the Western countries.
Gorbachev agrees to accept the disadvantageous terms dictated by the West and to cut weapons. He does it both to cut the expenses and to obtain credits. This was the only way to avoid strict measures and political suicide.
7.3 Price of the compromises
As long as the dialogue with the West was about the control over the arms race, it was the dialogue on par. Now that the Soviet leaders ask for money, equality is gone.
Usage of brute force to retain control over Eastern Europe is impossible, since it would lead to the loss of credits. This leads to the victory of Solidarność in Poland.
The price payed by the West for the Soviets giving up control over Eastern Europe was not high: credits from FRG for the re-unification of Germany, Italian and American credits. The West demands USSR to observe human rights.
The West informs the separatists in the Baltic countries that if they proclaim independence, USA will not guarantee their sovereignity. However, USSR will not get any credits if the Soviets use force against the Baltic countries.
7.4 Crisis of the empire and the national question
As it often happens in authoritarian multiethnic countries, political liberalization calls to life political forces based on nationalism.
In the first years of his rule, Gorbachev was convinced that there are no national problems in the country.
In 1986, students in Alma-Ata (Kazakhstan) protest against the appointment of a Russian candidate, G. Kolbin as the first secretary of the Central Committee of the Communist Party of Kazakhstan. The unrest was put down, but the USSR shown signs of weakness, cancelling Kolbin's appointment and replacing him with a Kazakh candidate, N. Nazarbayev.
Like in Yugoslavia, the discrimination of Russians is widely discussed and produces the same reaction as the discrimination of Serbs.
By summer 1988, national movements are formed in the Baltic countries, Armenia, Georgia. Their first natural step was to find foreign enemies. About 600,000 people flee from persecutions and become refugees.
To save the empire without using violence is impossible. To lose the empire and to stay in power is impossible, too. Violence will definitely lead to the loss of credits, economic collapse and fall of the empire.
Trying to quell the disorders in Tbilisi in 1989, the army uses violence against a demonstration. The political leaders attempt to avoid the responsibility and the army becomes the scapegoat. Eventually, in May-June 1989, during the pogroms against Meskhetian Turks in Fergana (Uzbekistan), the army refuses to act without direct orders. 103 people died, 1011 were wounded, 757 houses were burnt and looted.
7.5 Loss of control
In spring 1989 the communist candidates lost the elections.
Crime grows fast (1,514 thousand crimes in the first half of 1990 against 1,263 thousand in the first half of 1989). The number of crimes involving firearms grows by 30%. Laws and regulations on the republican, local and the union levels contradict each other.
The mixture of an inexperienced democracy and loss of the authoritarian control makes the democratic Soviet of the People's deputies (the parliament) to increase spendings on social programs, worsening the financial situation. The taken decisions cannot be fulfilled.
In summer 1988, government decides to finish the liberalization of prices in the first half of 1989. However, nobody wants to take decisive steps to this goal. In 1990 Gorbachev refuses to start transition to the market economy from the liberalization of prices, preferring more popular measures. The state expenses for the production of all kinds of goods are 20-30% higher than the profit from the sales.
7.6 From crisis to catastrophe
In 1989 the industrial production stopped growing. Since 1990 it decreases. Miners' strikes result in the dropping coal production. This leads to the lowering production in metallurgy. This, in its turn, impedes all other industries. Devaluation of ruble makes consumers buy more, increasing the deficit of consumer goods.
7.7 "Extraordinary efforts" instead of reforms
In the spring of 1990 Gorbachev chooses between a radical economic program prepared by N. Petrakov and a more moderate program by L. Abalkin. He cannot make his mind and postpones the decision.
Public opinion polls:
May '90: 50% support transition to the market economy. 60% say that it will not give any results in short term.
December '90: 56% think that the economic situation is critical, while 37% call it unfavourable. 70% expect the situation to become worse. 54% think that the catastrophe is possible in 1991. 49% say that there will be mass unemployment, 42% expect famine, 51% prepare to power and water cuts. 70% say that their wealth got worse in the last year. The main problems identified: survival, food supplies, raising prices, deficit of soap, clothes, fabrics, shoes, etc.
When asked when the USSR will recover from the crises, 45.8% replied that no sooner than in 2000. 12% thought that the USSR will never recover. 60% said that the main problems are deficit, poverty and lines.
In the end of 1989 52% supported Gorbachev. In the end of 1990 -- 21%.
First secretary of the Leningrad regional committee of the CPSU Gidaspov: "When I go to work in the morning, I see hundreds, thousands people standing in lines. And I think: now someone will break a glass and the counter-revolution will start in Leningrad."
In 1990 the monetary emission grew to 26.6 billion rubles.
The food supply in Moscow and Leningrad was also a critical priority (Soviet leaders remembered well how the revolution in 1917 began). In early 1991 the situation even in Moscow becomes catastrophic. In other cities it's even worse. In Nizhny Novgorod there is not enough food even for children and pregnant women.
Oil and gas workers follow the example of the coal miners and threat to strike. In 3 years the oil production decreased by 20%. Coal production in 1991 was 11% less than in 1990.
The government adopts "extraordinary" decrees on strengthening the struggle with the economic crimes and creates "extraordinary commissions".
In April 1991 the authors of the anti-crisis program of the Cabinet of Ministers write: "It is necessary to destroy the artificial trade barriers built in some regions and republics and to organize the supply of the most important resources for the agricultural enterprises. The Cabinet of Ministers will follow the anti-inflational policy, liberalization of prices and stimulation of business activity."
7.8 On the edge of default
Since mid-1989 the country is on the edge of bankruptcy. USSR asks the West for urgent help. The West is ready to help, but wants a clear anti-crisis program.
Aeroflot company stops selling aeroplane tickets to the workers of the Ministry of Foreign Economic Links, telephone company turns off their telephones.
The West wants to prevent chaos in the USSR and tries to help. G. Bush in Ukraine says on August 1 1991: "Freedom and independence are not the same. The Americans will not help those who abuse their freedom, replacing the earlier tyranny with a local despotism. Nor those who are inclined to welcome the suicidal nationalism based on ethnic hatred."
Europarliament sends food and medicine as a humanitarian aid. Bundeswehr sends military rations.
"People in Yaroslavl are happy to see standing lines: if you stand in the end, you may hope to buy something. But the lines are more and more rare. Two weeks ago a new one has appeared, the most angry and desperate one -- the bread line."
A schoolboy wrote: "Last week I stood in a terrible line for meat. I am afraid to even say, but I spent 5.5 hours there. We had lines before, but they were not so huge and some things could be bought freely. Now we have lines standing for everything, from meat and shoes to matches and salt... Had you seen our savage, mad and hungry people in terrible, savage lines, you would be shocked."
During the first quarter of 1991 the budget gains were 4.4 billion rubles instead of the planned 17 billion rubles. The price for oil on the international market was 60 rubles per ton, while the budgeted price was 105 rubles per ton.
The government discusses two options. The first is based on strict non-economic measures to limit the incomes of the citizens: cancelling social programs, freezing salaries, cutting capital expenditures. This option was rejected as impossible in the current social and political situation. The second option: to use the inflation to achieve the macroeconomic stabilization, protecting only a limited circle of people with fixed incomes. Industrial workers should compensate the losses by increasing productivity and sales. This also implies that the prices must be liberalized, except for a limited set of fixed prices on some fuels and materials and a minimum set of the basic life necessities. The second option is also rejected because of political risks.
Newspapers about the miners' strikes: "There are patrols on the streets: strong guys in white shirts. The order is ideal, there is zero crime rate in the city. The officials gave up their power in favor of those whom yesterday they refused to accept in their cabinets. Kirovsk, Snezhnoye, Shakhtyorsk, Torez, Donetsk... This is not a strike, this is a revolution."
The government faces the same choice as in 1985-86, but in a much worse situation. The government discusses possible ways of reforms, but adopts none.