The dissolution of the USSR was not a collapse, it was a class project

Lots of forces were at play before and during the dissolution of the USSR, and dominant Western analysis gets it all wrong

We’ve all been told that the Soviet Union was a failed experiment. It couldn’t compete with the West, its economy ground to a halt, its people wanted freedom, and eventually it just fell apart. Francis Fukuyama published “The End of History?” in 1989 and the phrase stuck, because it told the winning side exactly what it wanted to hear (Fukuyama, 1989).

But when you actually look at what happened, at the material evidence rather than the narrative, the story doesn’t hold. The Soviet Union was not a building that crumbled from structural failure. It was taken apart, deliberately, by a specific class of people who stood to gain from its dismantling, and the evidence for this is not hidden or controversial. It is sitting in declassified CIA reports, in the text of Soviet legislation, in referendum results that were ignored, and in the exposed career trajectories of the people who went from running the Communist Party to owning Russia’s largest private enterprises.

This article works through that evidence step by step, using the same dialectical materialist framework that I use in all my articles. It starts with the material conditions the Soviet economy actually faced, moves through the historical sequence of reforms that destabilised the system, identifies the contradictions that those reforms created, and then maps all of this onto the broader global context. The point is not nostalgia for the USSR, but that if you don’t understand why and how it was dissolved, you can’t properly understand the world that was built on top of its dissolution.

The economy Gorbachev inherited

The Soviet economy was in trouble by the time Gorbachev took power in March 1985, but the nature of that trouble matters. It was not a sudden crisis. It was a long structural slowdown that had been building for three decades, and the way you characterise it determines what you think should have been done about it. Now forgive me, the next couple sections have a lot of statistics, but believe me, they are important.

CIA analysts had been tracking the deceleration since the 1970s. A 1977 assessment projected “a marked reduction in the rate of economic growth in the 1980s” to somewhere between 2-3.5% a year. GNP growth had fallen from 6-7% in the 1950s, to 5% in the 1960s, to 3-4% in the 1970s, and by 1985 the CIA estimated average annual growth at 1.8% for the period 1981 to 1985 (CIA, 1999). The official Soviet figures from Goskomstat told a more optimistic story, reporting 3.7% for the same period, but alternative Soviet economists like Khanin and Sel’unin, who were critical of the official “val” (gross output) methodology, estimated growth at just 0.6% (Popov, n.d., p.51; Goskomstat, 1990). Depending on which figures you trust, the economy was either growing slowly, barely growing, or effectively stationary.

The core problem was productivity. Total factor productivity, which measures how efficiently an economy converts inputs into outputs, fell from 2.8% annually in the 1950s to 0.1% in the 1970s, and turned negative after 1973 at -0.8% per year (CIA, 1999). The Soviet economy was growing only by throwing more labour and more capital at production, not by producing more from what it already had. This is what economists call extensive growth, and it works until you run out of new inputs to add. By the early 1980s, the extensive model was exhausted.

But, the economy was not on the verge of imminent collapse. Archie Brown, who wrote the most detailed account of the Gorbachev period, concluded that “despite the structural problems of the USSR during the 1980s, there was no sign of an impending collapse” and that the end “was exclusively due to the political (glasnost) and economic (perestroika) reforms launched to reform the state” (Brown, 1997). Mark Harrison’s quantitative reassessment found that “the Soviet economy at the end of the Brezhnev years faced serious problems but was not yet a hopeless case” (Harrison, 2003, p.38). Mark Kramer, writing in the Journal of Cold War Studies, found “the inevitability argument debatable” and noted that “there was no existential crisis in the mid-1980s” (Kramer, 2022).

This distinction is not academic. If the economy was dying of natural causes, then the reforms were a mercy. If it was sick but survivable, then the question becomes whether the treatment killed the patient, and if so, who prescribed it and why.

One claim that comes up constantly in the liberal narrative is that military spending bankrupted the USSR, that the arms race with the West simply bled the economy dry. The CIA’s own reassessment challenges this. Their analysts found that “the share of GNP devoted to defense had decreased from a high of about 15% during the Korean War period down to about 9% in 1960-61” (CIA, 1999). The defence share was declining, not increasing. The economic crisis was structural, a crisis of productivity and extensive growth, not a product of arms-race overstretch. There is a legitimate debate about the absolute level of military spending (official Soviet figures put it at 8-9% of GNP while the CIA estimated 16-17%), but even the higher figure does not support the claim that the military burden was the primary cause of economic decline (Popov, n.d., p.53).

But the numbers do show is something more human - consumption per capita growth fell from 4.1% in the period 1964 to 1973, to 1.9% from 1973 to 1982, to 0.6% from 1982 to 1987. Food consumption turned negative from 1985 onwards (Harrison, 2003). The demographer Murray Feshbach documented that “the Soviet infant mortality rate had shot up by over 50% in the 1970s” while “life expectancy for males had fallen from 67 years in 1964 to about 62 years in 1982” (CIA, 1999). These are not abstractions. These are people’s lives getting materially worse under a system that was supposed to be built for them.

The worm inside the apple

There is another part of the material conditions that gets much less attention in Western accounts but that Marxist-Leninist scholars have identified as equally important, which is the growth of what Gregory Grossman called the “second economy” (Grossman, 1977).

Grossman defined the second economy as “all production and exchange activity... being directly for private gain or being in some significant respect in knowing contravention of existing law.” By the late 1960s, the legal private sector already accounted for about 10% of Soviet GNP, with 76% of that coming from agriculture, 22% from housing, and 2% from services. But the illegal component was much larger and harder to quantify, and Grossman described it as “a major and extremely widespread phenomenon that for a very large part of the population is a regular, almost daily, experience” (Grossman, 1977).

What made this significant was not just the scale but the way it corrupted the state apparatus. Theft from state enterprises was, in Grossman’s words, “an implicit but integral part of the conditions of employment in the Soviet Union” and provided “significant additional income.” High party positions in Azerbaijan sold for between 10,000 and 250,000 rubles, which Grossman described as “profound institutionalization of a whole structure of bribery and graft, from the bottom to the top” (Grossman, 1977). Roger Keeran and Thomas Kenny, writing from an explicitly Marxist-Leninist perspective, traced how “after 1953, a new economic basis for bourgeois ideas began growing within socialism. This basis was the population engaged in private economic activity for personal gain, in a so-called second economy,” which “in effect re-created a petty bourgeois stratum” (Keeran and Kenny, 2004, p.63).

The second economy didn’t just coexist with socialism, it materially recreated a class with interests opposed to the planned economy. As Keeran and Kenny put it, “private economic activity never totally disappeared under socialism, but after being restrained under Stalin, it emerged with new vitality under Khrushchev, flourished under Brezhnev, and in many respects replaced the primary socialist economy under Gorbachev and Yeltsin” (Keeran and Kenny, 2004, p.63). Each successive leadership tolerated it further, until Gorbachev’s reforms didn’t just tolerate it but legalised it.

Acceleration, restructuring, and the laws that changed everything

Gorbachev’s first instinct was not restructuring. It was acceleration, uskorenie, an attempt to speed up the existing system without fundamentally changing it. The 1986 CPSU Programme, adopted at the 27th Congress, acknowledged “certain unfavourable trends and difficulties” and proposed that “the all-round progress of Soviet society... can and must be ensured by accelerating the country’s socio-economic development” (CPSU, 1986). The programme called for “eradication of mismanagement, and elimination of various non-productive expenditures and losses,” treating structural problems as failures of will rather than failures of structure (CPSU, 1986).

When acceleration failed to produce results, Gorbachev moved to perestroika, restructuring. And the two pieces of legislation that did the most to restructure the economy were the 1987 Law on the State Enterprise and the 1988 Law on Cooperatives. Together, they constituted what amounted to the legal architecture of primitive accumulation in the late Soviet period.

The Law on State Enterprise, effective January 1988, gave enterprises the right to set their own prices and wages and reduced the power of central ministries over production decisions. The US Commission on Security and Cooperation in Europe noted that it also mandated elections of managerial personnel. But “results were disappointing” because “workers demanded steep wage increases” while the economic structure remained unchanged, and Gorbachev “initially believed that the basic economic structure of the USSR was sound and therefore only minor reforms were needed” (CSCE, 1988). Market-like wage and price signals were inserted into a still-planned economy, producing inflationary pressures without productivity gains.

The Law on Cooperatives was more transformative, as it permitted private ownership of businesses in services, manufacturing, and foreign trade. Article 7 established that “a cooperative’s property is formed by the monetary and material dues paid by its members, the output they produce, the income generated by output sales and other activities,” creating independent property bases separate from state ownership. Article 19 gave cooperatives the right to sell “at prices and tariffs set by the cooperative by agreement with consumers or independently.” Article 20 declared that “the allocation of gross income for production and social development and labor remuneration is the exclusive right of the general meeting of cooperative members” and that “a cooperative by virtue of its socioeconomic nature is a self-capitalizing enterprise.” There was no limit on income (Law on Cooperatives, 1988; Nuti, 1989).

Think about what this means in practice. Cooperatives could buy inputs at fixed state prices, because the planning system still allocated inputs administratively, and then sell their output at whatever the market would bear. The gap between the state price and the market price went straight into private pockets. This is not a metaphor for primitive accumulation, but the literal mechanism.

By 1989 the cooperative sector had expanded rapidly, with more than a third of Soviet cooperatives providing domestic services, over 5,000 in catering, 7,000 making consumer goods, and consumer cooperatives accounting for approximately 27 percent of total commodity circulation (Nuti, 1989). The reform had “created many wealthy individuals and ‘perestroika millionaires,’ threatening egalitarianism within the Soviet Union,” while workers found themselves “competing amongst themselves for access to private ownership” (Nuti, 1989). A new propertied stratum was forming.

And the effects on ordinary people were immediate and devastating. The CSCE reported that implementing perestroika “added to existing shortages and created political, social, and economic tensions.” Goods at state fixed prices “quickly disappeared as speculators snatched them up or producers ceased making deliveries.” By September 1988, “many staple products could not be found even in Moscow” (CSCE, 1988). The halfway marketisation created opportunities for speculation while stripping the planning system of its ability to guarantee basic distribution. People’s material conditions got worse, not better, and the reformers then used that worsening to argue that even more marketisation was needed.

Who wanted capitalism, and why

The question of who actually wanted the dissolution is answerable with data. David Kotz and Fred Weir, whose Revolution from Above is based on over fifty interviews with Soviet officials and political actors, found that “a study of the ideology of a sample of the Moscow elite in June 1991 found that 76.7% had come to favor capitalism while only 12.3% supported democratic socialism and another 9.6% had a communist or nationalist ideology” (Kotz and Weir, 1997, p.2). Over three quarters of the Moscow elite had become pro-capitalist by mid-1991.

Kotz and Weir identified the material basis of this shift. “The earliest converts to a pro-capitalist position were members of the intelligentsia, particularly economists with favourable opinions of Western free-market economic thought, and the small but growing class of owners of small businesses permitted by the economic reforms of perestroika” (Kotz and Weir, 1997, p.2). The pro-capitalist coalition had three components, and each had a clear material interest. The first was, as mentioned above, the intelligentsia economists who had ideological affinity with Western economics. The second was the new petty bourgeoisie that the cooperative laws had created. And the third, and most consequential, was a faction of the party-state elite itself, the nomenklatura.

The material logic for the nomenklatura was straightforward. “While the party-state elite was the most privileged group in Soviet society, their privileges were limited, relative to the position of the average Soviet citizen, and particularly relative to the wealth of the elites of Western capitalism, by the socialist features of the Soviet system.” When perestroika made alternatives thinkable, “the members of this pragmatic group rapidly concluded that socialism... promised a less privileged life for them than a transition to capitalism” (Kotz and Weir, 1997, p.2). Under socialism, their privileges were capped. Under capitalism, accumulation would be unlimited. That is the class calculation behind the dissolution.

And the proof that this was the calculation is in what happened after. The same people who ran the Soviet system became the oligarchs. As Kotz and Weir document, there was “the preponderance of members of the former Soviet party-state elite within the new big business owning class that emerged after the Soviet demise” (Kotz and Weir, 1997, p.3). Kryshtanovskaya and White’s empirical study found that over 60% of Russia’s wealthiest millionaires were former nomenklatura. Their conclusion was blunt: “The outcome of all these changes was a substantial move towards the conversion of the power of the party-state nomenklatura into private property. The state, in effect, had privatized itself” (Kryshtanovskaya and White, 1996, cited in Akturk, 2008, p.17).

This confirms the class project, that changed the nomenklatura’s power from bureaucratic privilege into capitalist ownership.

Jerry Hough at the Brookings Institution called it “nothing less than a bourgeois revolution” in which the nomenklatura, those who controlled and managed the means of production, destroyed their own political system to create one that would “transform their control over the means of production into ownership” (Hough, 1997). Kotkin, writing from a more liberal perspective, reached a similar conclusion through different language, arguing that Soviet elites constituted themselves as vast “loot chains” over thirty years, preferring to plunder wealth rather than risk everything to preserve the Union (Kotkin, 2008).

The contradiction the world ignores

On 17 March 1991, the Soviet Union held a referendum. The question asked was, “Do you consider it necessary to preserve the Union of Soviet Socialist Republics as a renewed federation of equal sovereign republics, in which the rights and freedoms of a person of any nationality will be fully guaranteed?”