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Why Socialism Failed: Soviet Union

Gulags, Stalin, and the Cold War dominate Soviet Union history, but what about economics?

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Scenes of food shortages, long lines, and fed up Russians were commonplace in the Soviet Union. Moscow believed it could deliver a world of prosperity and egalitarianism by instituting advanced mathematical calculations to manage the economy.

Soviet Economics

Like every other socialist experiment throughout the 20th and 21st centuries, the ideology’s hallmarks – price controls, production quotas, central planning, and totalitarian government – were ubiquitous. And, akin to these pursuits, widespread misery and suffering were the orders of the day.

The Soviet Union employed all of the policies that today’s socialists and communists fantasize about as they sip their lattes, watch CNN, and sport t-shirts displaying the hammer and sickle: state ownership of the means of production, collective farming, communal living, nationalization of industrial assets, and centralized planning. The Soviets attempted to run the economy without market prices, instead relying on the intellect of Gosplan, a federal government agency that established the “correct” levels of prices, production, and wages.

For example, Gosplan determined the prices of retail goods by first calculating the total amount of money that was spent on wages and how much was ready for consumption. The agency would then use the tally and equate it to the value of all goods produced in that year according to one of their many five-year plans.

Goods were also classified into two categories: Group A, which was heavy industry, and Group B, which included consumer goods. The former was given top priority.

Effects Of Central Planning

Shortages of basic consumer products – food and otherwise – were prevalent. While scarcities were not as severe in major population centers, like Leningrad and Moscow, they were common in the rest of the country. You either found nothing on state-run store shelves, or you waited in long lines.

To alleviate the dire situation, the government instituted a rationing system, otherwise known as the “default option of Stalinist distribution.” Jurisdictions had different rules. Moscow, for example, established limits on the quantity shoppers could buy and regulated operating hours. Some cities had coupons; others imposed restrictions.

These developments soon shifted into other areas, including health care. Children could not purchase milk without a doctor’s prescription, hospital power outages were routine, and the government initiated a public awareness campaign about the dangers of overeating. Medical bureaucrats used anesthesia as a form of extortion; it was “unavailable” for surgeries, but if you paid a bribe, then it magically appeared. The infant mortality rate was so bad that the government did not count children as being born until they survived their first month.

The public finally had enough of socialism.

The Fall Of The Red Menace

The fall of the Soviet Union is a case study in waiting for the laws of economics to destroy a nation. The dissolution of the U.S.S.R. was caused by failed economics and the fatal conceit of the socialists.

Andrew Moran

Economics Correspondent at and Andrew has written extensively on economics, business, and political subjects for the last decade. He also writes about economics at Economic Collapse News and commodities at He is the author of “The War on Cash.” You can learn more at

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