Cold War Economic Trends: Mounting Proof That Socialism Does Not Work (1945-91)

Figure 1.--Here per-capita income data shows the stagnating Soviet economic trends beginnin in the mid-1970s. And remarkably this was during an era of riding oil prices which substantially inflated Russian economic data.

As a result of World War II and the Cold War, the Soviet Union was no longer the only Communist country. It was the most powerful Communist and controlled most other Communist countries, but there are many more socialist countries to assess. The Soviet economy after the War was presented by Soviet propaganda as a world leader. The Soviets reported strong growth numbers. Living standards did rise, but never approached those of the West. The huge growth numbers reported would suggest that Soviet living standards would narrow the gap with the West. This never occurred. Now we are not sure about the accuracy of Soviets statistics, but we do believe that impressive rates of econmomic growth probably did occur in the 1950s and 60s. But a range of factors were working against them. There were very high rates of military spending and unlike the West the scientific advances associated with weapons develooment and the Space Race were not allowed to filter down into the consumer economy. More importantly was the massive inefficency of Soviet industry. Basically the value of manufactured products coming out of Soviet factories were worth less than the value of the raw materials and other inputs going into the factories. Thus the more the Soviet economy grew, the greater the economic losses. So by the mid-1970s, the Soviet economy began to stagnate. For some time the Soviet propaganda machime manage to hide the stagnation from the outside world. As a result, the American press and Central Inteligence Agency (CIA) were surprised as the Soviet Union began to unravel (late-1980s). World War II affected the entire world. So we see Socialists economies created in many other countries. The War left Europe split by the Soviet imposed Iron Curtain. This created an economic experimtal area with socialism in the East competing with capitalism in the West. The results asonished the Soviets. The capitalist bloosomed with a series of ecomoic miracles beginning with West Germany. The socialist East controlled by the Soviet Union could not compete with the phenomnal success of the West. The developments in East and West Germany and North and South Korea was paricularly instructive. As a result of World War II, the Soviet Union and socialism gained enormous prestige, not only in Europe, but throughout the Third World where new independent countries came into existence as a result of de-colomization. As a result these counties adopted various socialist and central planning economic policies. The result was abject failure. In sharp contrast, the few new countries which adopted capitalist economies within a single short genrration had taken their economies from third world to Europoean levels. Four countries were involved which became known as the Asian Tigers. If the meteiric success of the Asian Tigers was not enough proof, the pièce de résistance occured in of all palces Communist China. The Chinese did what the Soviets refused to do--look at the facts. The Chinese economy languished under Mao. The Cultural Revolutiin was designed from stooping this. In the aftermnath of the cultural Revolution, Deng Xaoping began asking why Taiwan and the other Asian Tigers were florishing and Chuina was not. After a visit with Lee Kuan Yew in Singapore, becagan to intoduce market reforms (capitalism) to China (1976). In only a single generation some 300 million people in China were thrust from abject poverty to the prosperous middle class.

Created: 6:30 AM 10/23/2019
Last updated: 5:46 PM 10/23/2019