Monday, October 20, 2008

Lessons from Gorbachev

I recently bought a book at Ross for $10. It's called Atlas of World History and is like a 10th Grade History book with comprehensive charts and maps about major world events. It's nothing special, but it's a great book for basic research and understanding.

I was browsing though the book yesterday and was reading through the section on the fall of the Iron Curtain. Of particular interest was the discussion on perestroika and glasnost, programs that were designed to revive the stagnant and bankrupt Soviet economy. At that time, economic output was dependent on government mandated projections and not based on normal market pressures (supply and demand). Sovient Premier Mikail Gorbachev tried to use perestroika to open the Soviet economy to normal market principles, recognizing that his citizens were becoming aware of superior western living standards. Anyone can read about this on wikipedia or history books, but the following surprised me when I read it.

"One typical law passed as part of Perestroika was the law of state enterprise,
which allowed companies to determine their own output based upon the demand for
the goods they produced. Furthermore
the government was no longer
expected to bail companies out if they went bankrupt
."


I am not advocating one way or another for the recent bailout, but I do find it interesting that a Soviet reformer determined that its own economy was stagnant because companies could always rely on a state-sponsored bail outs and thereby could take unchecked risks.

4 comments:

Jeremy said...

Good old Gorbie' and his capitalist views, huh?

It's also interesting to note that this Russian capitalist movement commenced about the same time the price of oil/barrel dropped to levels where the Russian government began to lose money on its oil production. Contrary to what some believe, the Cold War was actually won because the price of oil was too low for the Russian army to keep up with America's increasing military. [I guess in some instances it's good to be dependent on foreign oil...]

Today, however, the same thing is happening. For Russia, and a few other countries that don't really like us, oil cannot drop below $70/barrel or they will begin to lose money.

***Million Dollar Question***

What happens when countries that hate America start to lose money because of the price of oil is too low?

ANSWER: Most of the events depicted in John's Revelation. We have scary times ahead...

Hans said...

I think decreased oil prices were a huge factor, but also the access to Western information that the Soviets could no longer block (VHS recording). When the Soviet military strolled into Georgia during a rebellion (not this year), illegal cameras taped and sent the materials to CNN. Up until the 80's the Soviets could stop this information, but with the internet and other new technology, it was only a matter of time before the deception that the West was poor would be discovered.

Until her late teens, my wife though that we lived in poverty. But after they saw how we lived, it was the beginning of the end.

Nate said...

I just want to know how he came to power or was taken at all seriously with that big thing on his head.

Greg said...

Many seem to think that since Gorbachev, Russia has adopted a "democratic" system. Unfortunately, few understand how socialists and communists use that word. Russia is still "democratic" for the ruling elite. But not for the rest of society.