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On the financial (union budget) side, several other factors are often quoted.

First, the anti-alcohol campaign of 1986-87. Contrary to a popular belief, it did save a lot of lives: see this mortality graph . However, it dramatically undermined union budget where share of receipts from alcohol trade was in double digits.

Another factor was a movement towards self-governance and workplace democracy that took place in 87-88, combined with lightly regulated cooperative movement. This lead to workers' councils voting for huge wage increases, and managers moving the most profitable assets (or the assets producing the most demanded goods) into cooperatives that used enterprise's energy, management, premises, spare parts at regulated prices, etc., but paid very little back in taxes (this is how future bankers and oligarchs started). The result was much lower profits that could be collected by the union budget.

So, the budget collapsed. When Eltsin started an economic war between Soviet Union and Russia - by promising formerly union-governed enterprises Russian jurisdiction with lower taxes, he was gaining some revenue (but Russian budget expenditures weren't that huge). Union budget was losing a lot, and Gorbachev was in no position to offer a sweeter deal in this race to the bottom.

So, there's a lot to be said on the economic side, and it's mostly internal and has nothing to do with Star Wars  which are often presumed to have bankrupted the Soviet Union.

One could also argue that it was Russia that have undermined USSR (the evil empire) from within. Well-deservedly, traitors don't get laurels for their deeds :-).

by Sargon on Fri Jan 12th, 2007 at 06:37:11 AM EST
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