Oil Crises and Soviet Collapse: Economic Shifts
Oil Crises (1973 & 1979-80)
The first crisis wasn’t solely due to rising oil prices. It resulted from overlapping issues: rising oil prices, speculative currency exchange, the collapse of the Bretton Woods system, supply shortages of raw materials, agricultural crises, and strained political relations between Europe and the US. Sociological factors, like the French May 1968 protests and anti-Vietnam War movements, also played a role.
Main Indicators
- Sharp rise in oil prices, causing distortions in industrial economies.
- Inflation rate reached 13%.
- Industrial output growth dropped from 6.1% in 1973 to -0.6% in 1975.
Recovery Aspects
Recovery involved regulating public and private consumption, increased external demand from oil-producing and developing countries, and a new financial environment with the boom of bank credit facilitated by petrodollar recycling.
Second Oil Crisis
The second crisis in 1979 mirrored the first, reducing growth rates in Western Europe and causing negative growth in the US. It was driven by rising oil prices, inflation, and public sector issues.
Solutions: Governments used a mix of monetary and fiscal policies. By the mid-1980s, most developed countries began to overcome the crisis.
Collapse of the Soviet Union
After the 8th five-year plan in 1975, signs of stagnation were evident: stabilization of the active population, reduced output and productivity growth, rising energy and transportation costs, growing external debt, and falling exports.
Economic Weaknesses
The planning system struggled with the increasingly complex economy. Bureaucrats resisted change and innovation. Consumer goods remained expensive, while defense spending stayed high. Gorbachev’s perestroika and glasnost aimed to reform the economic organization and increase openness.
Political Factors
Political reforms began in 1991 with the creation of the Commonwealth of Independent States (CIS). However, this led to chaos, disrupted trade, and shortages, increasing social unrest and the state deficit.