Socialism played a major role in every government decision made during the Brezhnev era. While the Khrushchev era saw a lot of regrowth and reform in various areas, Brezhnev focused on centralizing the economy. A series of economic reforms were made during the Brezhnev era, all designed to make the economy more efficient, but more importantly to adhere to socialist ideals. Certain economic activities were limited because they did not coincide with the socialist way, and many commodities were forbidden as well. Because the law prohibited certain economic activities, citizens became involved in an underground economy, where they would carry out essential economic activities through the black market and “middle men.” Goods were smuggled into the country or produced after-hours in underground facilities. Soon, this “shadow economy” grew to a level where participation was necessary for every citizen. Households were in need of supplemental income, and shortages of necessary goods forced individuals to turn to the black market. By the year 1980, virtually every citizen in the USSR had found themselves involved in this underground economy. And in the middle of it all was Brezhnev, who was deeply involved himself.
The system that existed during the Brezhnev era was doomed for failure because it was set up to serve the political and ideological interests of the USSR, and not for economic efficiency. It was clear that the system in place was doomed for failure. The laws in place only caused black market activity to increase, as the desire and demand for certain goods did not go away. In addition, in order to create the equality among citizens, prices were fixed to ensure all citizens would have the same accessibility. With the price below equilibrium, demand far outweighed supply and certain goods became scarce, therefore further encouraging black market activity.
The way the state originally approached controlling this illegal activity was by considering it an attack on socialism, and that is why they failed to control it. The second economy certainly contradicted socialist ideologies, such as income equality, but what the state failed to realize was that there were deeper issues that, in order to be solved, would have threatened the whole structure of socialism. This system became rooted entirely in Soviet life, and proved that the laws put in place were not serving the people. But the shadow economy represented more than just ineffective laws—it was a reflection of much deeper political, economic and structural issues within the Soviet system. It was the Soviet Union’s socialist ideals that led to the creation of this underground economy, and the effects of the shadow economy represented the repercussions of an extremely ineffective system of socialism.
In reality, the second economy was extremely necessary as it created alternative sources for the growing needs of the people, yet the overall effect of the second economy was clearly a corrosive one, and it only proved that the socialist system was not viable for the economy that needed to be in place. It is now almost 30 years since the collapse of the Soviet Union and the start of a new economic structure that is still fighting to overcome the faults of the Soviet’s socialist system and the Brezhnev era. Certainly the shadow economy left a legacy for Russia’s future, and proved that an economy is doomed for failure if governed by socialist ideals.
References:
“Underground Economy.” Seventeen Moments in Soviet History, 18 June 2017, soviethistory.msu.edu/1980-2/underground-economy/.
Rutgaizer, Valeriy. “The Shadow Economy in the USSR.” The National Council for Soviet and East European Research. 34, February 1992. https://www.ucis.pitt.edu/nceeer/1992-900-03-Rutgaizer.pdf
Mostovshchikov, S. “Timely Interview: THE ‘SHADOW’ ECONOMY”. Current Digest of the Post-Soviet Press, The, No.41, Vol.40, November 09, 1988, page(s):11-11
Welcome to my Soviet History Blog! 
I don’t think it is correct to say that an economy is doomed for failure if it is governed by socialist ideas. The Soviet command economy was meant to build up heavy industry which the country lacked in the early 30’s, and in that since it worked right up until the late 60’s. The problem for the Soviet economy was that in the early 70’s it could not shift priorities when many advanced western economies were quickly digitizing and turning into service based economies.
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I agree with De’Vonte’s comment that the economy was not doomed to fail simply because it was in a socialist society. Yes the Soviet economy failed, but from mismanagement and bad decisions on the part of the government, many of which could probably be argued as going against socialist ideals. Any economy will eventually fall apart if it is unable to adapt to the changing world and needs of its people. I do think you did a good job in you post of showing the interplay between the shadow economy and the official economy in the Soviet Union. You explain well how the issues with the economy helped to evolved the shadow economy, and the major role it played in the lives of all citizens.
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Claire, you bring up an interesting point about the economy being doomed to fail. I agree with you. The major cause of the failure was “seeing” the economies of outside countries, especially the USA. Soviet visitors to European and American stores, like Wal-Mart or your Krogers, saw that extensive array of consumer product available to the average people that were just not available to the average Russians. If you can keep the influence of the outside from the locals, then you have a chance of satisfying their need as they know nothing else but just let a little sunshine in and the system begins to fail. The same goes to mrestaurants
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Hi Claire! I really enjoyed reading your post, and I feel like you did an excellent job of explaining how the underground economy interacted with the official economy, and how a lack of good management can push people to seek other means of acquiring goods. Like Tom, I think you bring up an interesting point about why the economy failed. De’Vonte brought up the USSR’s inability to shift to digitalization, but I think the question there should be: why? Why couldn’t the government and its economy adapt to changing times when everyone else was? Was it poor leadership? Probably; but it was oftentimes leadership that was in-line with socialist ideals, like with Brezhnev. And as far as the black market goes, the Soviets had almost no choice but to let the black market exist because it was keeping people afloat. I don’t think you’re attacking socialism here, I think you’re addressing the Soviet-style socialism that forced people to create their own economy when their government wouldn’t step up on their behalf. There’s only so much control and suppression people can take, especially when it comes to their money and how they spend it.
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This is such an important and interesting topic. Thanks for writing about it. I don’t think the Soviet economy was “doomed to fail” just because it was socialist. Or because it had a black market. There are boatloads of black markets all over the world that coexist just fine with a variety of political and economic systems. Check out Natilie’s post, which connects the underground economy to the challenges of consumerism and generation: https://blogs.lt.vt.edu/natalieg99/2020/04/26/an-underground-economy/#comment-67
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I have to agree with Tom’s comment. While I don’t think every socialist system is doomed, the Soviet Union was never going to be able to compete with America’s capitalist system at the speed it tried to. I think the Soviet economy was doomed not because of its socialist principles, but its mission to compete with the speed and size of America’s economy.
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Hey Claire, I think you make many good points throughout your post in regards to the economy of the Soviet Union. The Soviet economy, from what I have seen, did not appear by the 1970s to be able to pivot in the direction that it needed to. This command economy, while effective in the 1930s providing for the necessary growth of heavy industry, could not be as effective in comparison to the Western economies that were increasingly modernizing. Post made at 9:08pm EST.
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Hi Claire! Thanks for the post. After hearing and reading about the black market so much over the last few months, it’s really interesting to see someone actually dive into it. I think the point you made about how the shadow economy was evidence of the system failing to meet the people’s needs is very valuable. Black markets for illicit items exist everywhere, but when people are choosing to go to it for basic items it’s a sign that the legitimate system has a deficiency somewhere.
As an aside, do you know what kind of goods were most popular on the shadow market?
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