Although Ronald Reagan and the republicans love to take credit for ‘winning the cold war’, which culminated in the collapse of the USSR, they should probably not do so. As former CIA Director, Robert Gates, said “Did we win or did the Soviets just lose?” Like most questions in politics and economics, there is no simple answer.
There are several commentators who seem to think that the USSR had simply reached its ‘use-by date’ and that its death was a natural outcome of its 69 year existence. Others believe that the massive defence spending by the US and assorted proxy wars in which the US supported opponents of those supported by the USSR, led to the union being bled dry financially. Some believe that it was the attempt by President Gorbachev to restructure (perestroika) the economy to allow private ownership, and the allowing of people to speak out (glasnost) against the government, both of which were mishandled, that led to the collapse of the USSR. As I indicate above, the answer is not simple and may be a combination of all of these. However, I suspect that the ‘deep cause’ is communism itself. As the historian Arnold Toynbee said “civilisations die from suicide, not murder”.
Communism deprives people of incentive. You are not allowed to own much in the way of property, nor are you allowed to set up a business, so there is no reason to work hard except for job satisfaction. As a consequence, for most of the population, there is little drive to innovate. The communist USSR therefore effectively had a two-tiered society, those who were the state (party members or ‘nomenklatura’) and those who worked for the state (all those otherwise employed). For instance, it was only the former who were driven around in large Zil or Volga cars, while the latter saved like crazy for years to buy a smaller Lada. Not only that, but the system was corrupt and robbed the common people of their dignity and when Gorbachev saw these signs, he said “We couldn’t go on like that any longer, and we had to change life radically, breaking away from the past malpractices”. When this was made clear, the people said ‘of course we cannot continue like that’, and the system collapsed. It seems that someone simply had to articulate the problem and attempt to do something about it, for the populace to follow, because they knew what the problem was, they were just not in a position to do anything about it.
Unlike communism, capitalism is all about providing incentive. People are, to varying degrees, encouraged to work hard, innovate and to set up businesses, and if successful, personal enrichment is the result. This is seen in the estimates of GDP per capita in 1991 in the USSR (~$9,200) compared to that of the US (~$24,360), which was almost three times as much. On the surface, this sounds like everything should be hunky dory in a capitalist state. However, the current state of the US is disturbing, in that it is approaching the two-tiered society more closely than at any time in the last hundred years. This is clearly illustrated by the disparity between rich and poor and is exacerbated by the ‘hollowing out’ of the society, whereby the middle class is much smaller than it used to be, such that there is no obvious way forward for anyone to get out of grinding poverty. To go up the ladder you have to be able to see or feel the rungs. Currently, the top 0.1% of the population own the same, in dollar terms, as the bottom 90%. This, as in the USSR, is an unsustainable situation, the only difference being that the ‘nomenklatura’ are the exceedingly wealthy individuals and not ‘party apparatchiks’, living in a ‘greed is good’ bubble, and not caring one iota for the common citizen. This robs people of their dignity and only leads to resentment and anger, and in a land full of guns, it is not surprising that many Republican members of Congress are pulling out of their ‘town-hall’ meetings where they have to interact with members of the public.
Members of Congress live a life much like that of the Soviet ‘nomenklatura’, flitting from meeting to meeting or rally to rally where they tell the common people how good they have it in the ‘land of the free and the home of the brave’ and it is all down to their political party who made things so wonderful for them. Some people believe them, but the statistics tell the opposite story.
In the period from 1979 to 2013, the average pay of the top 1% grew by 138%, while that of the bottom 90% grew by about 15%. So, the rich are getting vastly richer, while the poor are staying poor. In early 1981, when Ronald Reagan became President, the average salary of a CEO was about 30 times the average worker’s salary in the same industry, now it is 296 times. The rich keep getting richer. From 1948 to 1973, productivity had risen by 96.7% and hourly wage rates had risen by 91.3%. From 1973 to 2013, productivity has increased by 74.4%, while hourly wage rates went up only 9.2%. The rich keep getting richer.
Another problem for the US is the propensity of some of those in Congress to effectively blame the poor for their situation. Clearly, some people are to blame, at least in part, for their situation, but that is no reason to repeal the Affordable Care Act, or to reduce protection of clean air and water. None of those in Congress will suffer from such repeal, as they are all very well looked after, or very rich, or both.
There is no better way to rob people of their dignity than to rub their noses in their poverty through ostentatious displays of massive wealth. No country can continue to have such a two-tiered society. The USSR tried and failed. Will the US be the next to go?
Sources
http://www.epi.org/publication/charting-wage-stagnation/
http://www.epi.org/publication/stagnant-wages-in-2014/
http://history.howstuffworks.com/history-vs-myth/who-won-cold-war3.htm
http://foreignpolicy.com/2012/06/18/10-reasons-countries-fall-apart/
Aron, L., 2011. Everything you think you know about the collapse of the soviet union is wrong. Foreign Policy 187
