IB History Economic Factors Notes

Key Questions

1. What caused economic problems in the USSR and how did this lead to a reduction in military spending?
2. Why did economic decline in Eastern Europe lead to the rise of ideological challenges and dissent?
3. What was the impact of Gorbachev's economic reforms?

Economic problems in the USSR

1. Economic Weakness of the Soviet System

1. By the 1970s and 1980s, the Soviet economy was suffering from long-term structural problems caused by central planning and lack of market incentives.
2. State control over production led to inefficiency, poor quality goods, and chronic shortages of food and consumer products.
3. The economy prioritised heavy industry and the military at the expense of housing, agriculture, and consumer welfare.
4. Low productivity and outdated technology meant the USSR fell behind the West in innovation and living standards.
5. These weaknesses reduced public confidence in communism and increased pressure for reform.

2. The Cost of the Arms Race and the Need to Reduce Military Spending

1. The Cold War arms race placed an enormous financial burden on the Soviet economy.
2. A very high proportion of Soviet GDP was spent on defence, including nuclear weapons, conventional forces, and maintaining control over Eastern Europe.
3. Competing with the USA in advanced military technology, especially after Reagan’s military build-up and SDI, proved economically unsustainable.
4. Money spent on weapons could not be used to improve living standards, infrastructure, or consumer goods.
5. By the mid-1980s, Soviet leaders accepted that continued military competition threatened the survival of the system itself.

3. Falling Oil Prices and Declining State Income