<< I think there is another decisive factor associated with USSR collapse.
Military expending was very high. In the range of 15-2% GNP. This is
a very good way to bankrupcy. Even the USA, with a much stronger economy,
sufered a lot with military spending from 5-7% of the GNP. I think USSR
couls have gained some time by decreasing defense spending. We must also
consider that those 1-2% GNP growth from 1975-89 probably reflected a
growth in military expenses while the "civil economy" could be in fact
dwindling during those last 15 years. Any information on this? >>
Military spending may have been a factor. You have to add that in the US, militarys pending is a sort of industrial policy in a nation without one, and one that has some Keynesian effects. It's a loss, but not a dead loss. In the USSR, military spending was arguably a dead loss in part. The economy didn't have its own business cycle, so there were no Keynesian benefits, and it was an inmdustrial policy, one inw hich the military just hogged the lion's share of the best personnel and resources. Finally, the Soviet economy was a lot smaller than we used to think, so military expenditures were proportionately a larger share.
On the other hand, a lot of what was classified as "military" in the USSR was done so for accounting purposes only: a lot of plain old industrial and indeed consumer production was done in the military sector; maybe as much as 20% of that sector. And of course there was a big armns export business that brought the USSR hard currency. The USSR was one of the biggest arms merchants in the world.
All in all, I do not buy the Reaganite theory that military spending drove the Soviet economy to collapse. I think it hurt rather than helped on the balance, but I do not think that the Soviet economy was near collapse in 1985. It was slowing and tottering. It had long ago lost the race to overtake and beat the advanced capitalsit west. But it was not brought to a halt by its internal dynamics. It was actively taken apart between 1988 and 1991. The main elements of central planning were suspended and not replaced with anything. The perestroichiki seemed to have fallen for the dangerous idea that markets just grow naturally if the government backs off. And they lacked any real interest in handing the factories and farms to the workers to see if they could do better than the planners had done--that is, in the socialist solution.
--jks