by Jim Rose in constitutional political economy, economic history, economics of bureaucracy, Public Choice, rentseeking

I find many explanations of the fall of the USSR disappointing because many want to believe in people power and popular rebellions.

The rise and fall of mercantilism view of the USSR put forward by Pete Boettke will be the foundation of better explanations. By analysing communism as a rent-seeking society, the process of social and political evolution can be embedded into the history of the rise and fall of mercantilism.

More freedom in Russia and China came as an unintended by-product of a constitutional struggle over who would control the rules under which the economy prospered (or failed to prosper) and the sharing within the elite.

After the death of Stalin, the Soviet Nomenklatura used both co-option and political repression to encourage loyalty to the communist regime. As Grossman noted:

Under Stalin’s leadership the nomenklatura, after initially emphasizing a strategy of co-option, then experimented with political repression as a substitute for co-option, and finally, in response to the threats posed by German militarism and the onset of the Cold War, employed a combination of intense political repression and co-option. As a result, membership in the CPSU increased rapidly, then decreased sharply, before increasing rapidly again. After Stalin was gone the nomenklatura, having learned the cost of Stalin’s repressive excesses, adopted a policy that combined more co-option with less intense political repression. As a result, membership in the CPSU increased steadily, then levelled off, until the rapprochement between the United States and China, the emergence of Islamic fundamentalism, and the escalation of the cold war arms race resulted in yet more co-option and in the final episode of growth in party membership.

More and more of the general public in Russia and China were co-opted into the winning circle through peacefully adaptations when threats of revolution were minimal.

The cost of co-opting people into the Communist Party was a decrease in the standard of living of members of the Nomenklatura, whereas the cost of political repression was the danger that members of the Nomenklatura would themselves be victimized.

These successive minor reforms were mutual beneficial constitutional exchanges as suggested by Roger Congleton’s brilliant recent book on his king-and-council template and in Herschel Grossman’s earlier paper on co-option in the communist party from 1953 to 1989.

The USSR broke apart as the result of an internal power struggle within a new generation of leaders who grew up in a climate of corruption and high living.

Perestroika and glasnost should be viewed as nothing much more than the usual system reforms and rotations of patronage that were launched after the appointment of all previous Soviet leaders. As Anderson and Boettke explain

…upon closer examination, the succession of Gorbachev in general and the perestroika/glasnost “reform” program in particular bear a close resemblance to other, earlier Soviet government policy adjustments which followed shifts in the top leadership. Gorbachev’s behaviour as a “reformer” over the period 1985 to 1989 can be explained by reference to the incentives facing the dictator of a socialist state based on the distribution of economic privilege and political patronage… Gorbachev’s period of “reform” was not an extraordinary example of the role of ideology or vision in human affairs, but a more routine episode of rent-seeking in action.

Political and economic power was devolved to the 15 republics in the old USSR because this is the only way to operate a mercantilist state.

These local leaders formed their own alliances and declared succession from the USSR when the centre was too weak to fight. Local military units defected with them to a new rent-seeking coalition.

The fall of soviet communism led to a drawn out struggle for access to patronage and state monopolies and a new and better paid manifestation of the old mercantilism but ex-KGB owned and run under Putin.