Why the USSR Collapsed: Inside the Slow Failure of a Planned Empire

Opening story: three days that ended an empire

August 19, 1991. Early morning in Moscow.

People turn on the TV expecting the usual news. Instead, they get the ballet Swan Lake on repeat. No explanation, no commentary. Just ballet.

Then a shaky press conference. Gennady Yanayev, the Vice President of the Soviet Union, sits at a table with other senior officials. His hands visibly tremble as he reads a statement: President Mikhail Gorbachev is “unable to perform his duties.” A new “State Committee on the State of Emergency” is taking over “to save the country.”

You don’t need a PhD in politics to translate that: it’s a coup.

Tanks roll into Moscow. Soldiers are young conscripts, often 18–19 years old from distant provinces, who aren’t sure why they’re there. Some locals bring them tea and sandwiches. Others argue with them about democracy.

Near the Russian parliament building (the “White House”), something different happens. Boris Yeltsin, recently elected president of the Russian Republic inside the USSR, climbs onto a tank in front of a crowd. Someone hands him a microphone. He denounces the coup as illegal and calls for a general strike. It’s a simple visual: old Soviet hardliners in a dim room vs a blunt, populist politician standing on a tank in daylight.

The plotters expected fear and obedience. Instead they get hesitation and defiance.

Within three days:

• Army units refuse to storm the parliament.
• Crowds grow instead of dispersing.
• The “emergency committee” collapses.

The coup fails. But something deeper dies with it: the last remaining authority of the Communist Party and the central Soviet state.

Four months later, in December 1991, the leaders of Russia, Ukraine, and Belarus sign an agreement in a forest residence in Belarus (the Belavezha Forest) declaring that the USSR no longer exists. Gorbachev resigns. The red flag over the Kremlin comes down.

If an empire can be finished off by three days of badly executed coup, it was already structurally weak. The real question is: how did a state that could put the first human in space become so brittle that a single shock shattered it?

To answer that, we need to step back and look at what the USSR actually was.

🗺️ Background: what kind of system are we talking about?

Geography and basic structure

The USSR (Union of Soviet Socialist Republics) existed from 1922 to 1991. On a map, it was enormous:

• From the Baltic Sea in the west to the Pacific Ocean in the east.
• From the Arctic Ocean in the north to the mountains and deserts of Central Asia in the south.
• Across 11 time zones — when people in Minsk were going to sleep, people in Vladivostok were starting their workday.

That sheer size wasn’t just impressive on a globe. For a planned economy trying to move coal, grain, parts, and finished goods on centrally written schedules, it was a logistical nightmare: different climates, bad roads, overloaded railways, and time zones ripping coordination apart in subtle ways.

Formally, it was a federation of 15 “union republics” (Russia, Ukraine, etc.). Each had its own constitution, parliament, and symbols. In practice, power was extremely centralized:

• The Communist Party was the real core.
• A small group at the top, the Politburo, made the key decisions.
• At the center of economic control was Gosplan, the State Planning Committee, which tried to decide how much of almost everything should be produced, where, and with what inputs.
• The KGB (state security service) watched for dissent.
• The military enforced Soviet influence abroad and was the ultimate backstop at home.

This was also the main rival of the United States in the Cold War — the long geopolitical and ideological standoff after World War II, with nuclear weapons and proxy wars instead of direct great-power battles.

How the planned economy actually worked

On paper, the Soviet economy was socialist:

• Almost all factories, farms, and infrastructure were owned by the state.
• Private business was mostly illegal or tightly restricted.
• Prices for most goods were set by the state, not by market supply and demand.

In practice, it was a huge command system:

• Gosplan and other planning bodies tried to decide how much coal, steel, machinery, grain, etc. the country needed.
• They allocated inputs (steel, fuel, labor) to state enterprises.
• Enterprises had to meet detailed annual and five-year plan targets, often expressed in physical volumes.

Managers were evaluated mainly on how well they hit their targets, not on whether their products made sense or satisfied real customers.

A few key mechanisms matter here.

Soft budget constraints

In a normal market, if a firm keeps losing money and can’t pay its bills, it goes bankrupt: hard stop. In the USSR, state enterprises almost never “died” that way.

If a factory missed its targets or ran deficits, it usually got:

• more subsidies,
• extra deliveries of inputs,
• easier targets next time.

There was always another bailout. That’s a soft budget constraint: everyone expects that failure will be covered by someone else.

Result:

• Managers had weak incentives to cut waste or innovate.
• They focused on lobbying planners for better terms rather than seriously restructuring their factories.

Map vs territory, and lying as a survival strategy

To plan an entire economy, Moscow needed good numbers: how many machines, how much capacity, how many workers, what productivity. That’s the “map.”

Managers, however, needed to survive and get rewards. They knew the center would use their reported capacity to set targets. So the survival strategy was:

• Understate what you can do when targets are negotiated.
• Overstate what you did do when reporting results.

This meant:

• The map (statistics in Moscow) drifted away from reality (what was actually happening in factories and stores).
• Planners made decisions based on distorted reports.
• The more they relied on these reports, the worse the mismatch became.

Goodhart’s law in steel and shoes

Planners needed simple indicators. So they used things like:

• tons of steel produced,
• number of machine tools,
• pairs of shoes.

But once those numbers determined bonuses and promotions, factories optimized for the metric, not the underlying goal.

Examples that show up again and again in Soviet accounts:

• If the plan cared about tons of steel, factories produced heavy, thick, low-value steel.
• When targets switched to value, they produced specialized, expensive goods that didn’t match real needs.
• Shoe factories hit the target by making lots of one or two sizes, whether people wanted them or not.

“When a measure becomes a target, it stops being a good measure.” That’s Goodhart’s law in action.

Everyday life near the end

By the 1970s and 1980s, the Soviet Union was still a military and industrial heavyweight. But everyday life for citizens did not feel like life in a “second superpower.”

A typical city family:

• Lived in a small apartment in a concrete high-rise built in the 1960s–70s, often one or two rooms for a whole family.
• Had a fridge and a TV (often black-and-white, then color later).
• Might wait years for a car; owning a private car was a big status symbol.
• Might wait years for a telephone line.

There were almost no independent newspapers or TV channels. Media were state-owned. Consumer choice was extremely limited: a few models of each product, often low quality.

The central word people remember is shortages:

• Long queues for meat, sugar, butter, even basic items like soap.
• Shops with almost empty shelves, but storage rooms full of goods reserved for “special distribution.”
• Many goods reliably available only “through connections.”

That informal system was called blat: using personal networks inside the system to get what you needed — food, spare parts, housing repairs, medical help. You didn’t primarily solve problems by going to a market with money; you solved them by knowing someone.

On the surface, the state delivered:

• very low official unemployment (almost everyone was “employed” somewhere),
• stable nominal wages,
• cheap rents and utilities.

In reality:

• Many workplaces were overstaffed, pretending to work.
• Many people had side hustles in the shadow economy (repair work, private taxi, informal trade).
• The official plan and the real economy were diverging.

This was the “social contract” of late Soviet times:

The state gives you stability, some material security, and no civil war. You don’t challenge the Communist Party’s monopoly on power.

For a while, especially after the trauma of World War II and Stalin’s terror, many people accepted this.

The macro picture: from forced growth to slowdown

After World War II, the USSR rebuilt fast and grew rapidly for a time. It:

• moved millions from low-productivity farming into industry,
• built heavy industry and infrastructure,
• created a strong military and space program.

This is catch-up growth: when a poor country copies existing technology and moves labor to more productive uses, growth can be fast.

By the 1960s and especially the 1970s, the easy gains were largely exhausted:

• It became harder to boost output just by building more of the same factories.
• Productivity growth slowed.
• To keep up with the West, the USSR would have needed more innovation, better management, and more honest information.

Instead, it doubled down on the old tools: more investment, more pressure, more plan targets.

One thing kept this going longer than it otherwise would have: oil.

⏳ Timeline

Find a timeline of the main events for this case below.

Act I – Forced growth and its hidden limits

To see the weaknesses in the 1980s, we need to see the earlier model.

Under Joseph Stalin (who ruled the USSR from the late 1920s until his death in 1953), the country:

• collectivized agriculture (forcibly merging private farms into state and collective farms),
• industrialized at huge human cost,
• carried out mass repression, purges, and the Gulag system of forced labor camps.

The human toll was enormous. Millions were executed or died in camps. Millions more starved in man-made famines like the 1932–33 famine that hit Ukraine and other regions especially hard. The industrial base was built on fear, forced labor, and dispossession.

After Stalin’s death, Nikita Khrushchev (Soviet leader from 1953 to 1964) tried to soften terror, release many prisoners, and focus more on housing and consumer goods. He launched huge housing programs so families could move from communal apartments and barracks into separate flats. He also publicly denounced some of Stalin’s crimes in his 1956 “Secret Speech,” shocking the party.

The growth model in these decades had a simple logic:

1. Move underemployed rural labor into industry.
2. Build basic infrastructure and heavy industry.
3. Direct massive investment into priority sectors.

As long as you can keep mobilizing more labor and more capital, this works. But there are two built-in limits:

• Diminishing returns: each new steel plant adds less value than the previous one.
• Complexity: as the economy grows, it becomes harder for a central planner to coordinate everything.

By the mid-1960s, Soviet leadership could see that productivity was weakening. There were attempts at reform, especially under Alexei Kosygin (the prime minister), who pushed a 1965 reform to give enterprises more autonomy and tie bonuses to profit. But these reforms were resisted by the bureaucracy:

• Party officials feared any move toward profit-based decisions as ideologically dangerous.
• Managers feared losing the protection of soft budgets.

So the system partly reformed on paper, but the old incentives and habits stayed.

Act II – Brezhnev’s “stability” that was actually stagnation

In 1964, Leonid Brezhnev replaced Khrushchev and ruled until 1982. His brand was “stability.” He stopped big disruptive campaigns and promised steady, predictable development.

Three things defined this era.

1. Oil and gas windfall

In the 1970s, the global oil market changed. The Organization of the Petroleum Exporting Countries (OPEC) restricted supply, prices shot up, and oil exporters earned a lot more per barrel.

The Soviet Union, with huge oil and gas reserves in Siberia, suddenly had:

• a big stream of hard currency (Western currencies like dollars and deutsche marks that could be used to buy goods abroad),
• more money to pay for grain imports (Soviet agriculture was still inefficient),
• and more resources to fund military spending and support friendly regimes abroad.

This masked underlying problems. If domestic industry couldn’t produce good consumer goods, you could import some with oil money. If you couldn’t grow enough grain, you could buy it from the US and Canada.

2. The “social contract” hardens

Brezhnev’s deal with society was:

• No mass terror on the scale of Stalin.
• No chaotic experiments like some of Khrushchev’s campaigns.
• Gradual improvements in housing and consumer goods.
• Steady pensions, cheap staples, basic healthcare, and education.

In exchange:

• No real political competition.
• No organized opposition.
• No questioning of the Party’s leading role.

But this “calm” was built on the memory of earlier terror and on ongoing low-level coercion. Dissidents were harassed, jailed, or sent to psychiatric hospitals. Nationalist movements in places like the Baltics or Western Ukraine were monitored and suppressed. Eastern Europe stayed in line because everyone remembered that when Hungary (1956) and Czechoslovakia (1968) tried to break out, tanks rolled in and people died in the streets.

For many Soviet citizens who had lived through war and famine, this tradeoff still felt better than another round of chaos.

3. The technology and management gap widens

While the USSR remained competitive in:

• heavy industry,
• military technology,
• space (it put the first man in space, Yuri Gagarin, in 1961),

it fell behind in:

• computers and information technology,
• modern management methods,
• consumer products and services.

Western firms were learning to run decentralized operations with better data systems and incentives. The Soviet system still relied on paper plans, phone calls, and personal influence.

By the late 1970s:

• The official statistics still showed growth, but independent reconstructions later found that growth was slowing sharply.
• Life expectancy stagnated or even declined in some years.
• Shortages became more widespread.
• The shadow economy — unreported, semi-legal private activity — grew because people still needed things the plan didn’t provide.

This was the Era of Stagnation: not total collapse, but a long period where the system burned through its reserves (physical, financial, political) without renewing itself.

The geriatric interlude

By the early 1980s, even the leadership itself symbolized decay.

• Brezhnev died in 1982 after years of visibly declining health.
• He was replaced by Yuri Andropov, a former KGB chief. Andropov tried some anti-corruption and discipline campaigns, but he was already very ill and died in early 1984.
• Then came Konstantin Chernenko, another elderly party insider, who ruled for just over a year and died in March 1985.

In barely three years, the USSR burned through three leaders. The top of the system looked like a nursing home: old, sick men reading wooden speeches about “developed socialism” while the economy stalled and the population quietly checked out. There was no sense of renewal.

Act III – External pressure, internal shocks

In the late 1970s and early 1980s, several shocks hit the system at once.

The Afghanistan war

In 1979, the Soviet Union sent troops into Afghanistan to support a friendly communist government that was facing revolt. It assumed this would be a limited operation.

Instead, it turned into a decade-long guerrilla war — irregular warfare where local fighters (the mujahideen), supported by foreign aid (including from the US and Pakistan), fought Soviet forces in difficult terrain.

For the USSR, Afghanistan was:

• costly in money and lives,
• damaging for morale in the army,
• a visible symbol of a failing foreign policy.

It looked uncomfortably like the US in Vietnam. And it reminded Soviet citizens that the regime still treated people as expendable when it suited geopolitical goals.

Arms race with the US

At the same time, the arms competition with the United States intensified.

In the early 1980s, US President Ronald Reagan increased defense spending sharply and announced the Strategic Defense Initiative (SDI) — a proposed missile defense program using advanced technology in space and on Earth.

Whether SDI was technically realistic didn’t matter politically. It signaled:

• The US was willing to outspend and out-innovate the USSR.
• The Soviets would have to invest heavily just to avoid falling behind in nuclear deterrence.

With an already strained economy, matching US defense spending was a heavy load. But backing off was hard for a regime whose legitimacy depended heavily on being a military peer of the US.

Oil prices turn from friend to enemy

After peaking in the early 1980s, world oil prices fell in the mid-1980s. At the same time, some Soviet oil fields were maturing and production growth slowed.

For a system that had become accustomed to easy oil money, this was painful:

• Less hard currency to pay for food and technology imports.
• Less cash to subsidize both consumer goods and the military.
• Bigger budget strains in Moscow and in the republics.

Chernobyl and the credibility hit

On April 26, 1986, the Chernobyl nuclear power plant in northern Ukraine (then part of the USSR) exploded during a safety test gone wrong. It was one of the worst nuclear accidents in history.

Two things mattered politically:

1. The technical failure itself exposed shortcomings in Soviet engineering and safety culture.
2. The initial reaction followed an old script: denial, secrecy, delayed evacuation.

Radioactive clouds did not respect borders. When Scandinavian monitoring stations picked up radiation, the world knew something had happened before the Soviet government made a clear statement.

For Soviet citizens, Chernobyl became a symbol:

• The state could not protect them from man-made disasters.
• The state still reflexively hid bad news, even when millions of people were at risk.

This would fuel anger later when more information came out under Gorbachev’s glasnost.

Put together, by early 1980s the USSR had:

• a slowing, inefficient economy,
• a burdensome empire,
• an expensive arms race,
• less oil money,
• and rising visible failures.

The old Brezhnev formula — buy stability with oil money and mild repression — stopped working.

Act IV – Gorbachev tries to fix a flying plane

In March 1985, Mikhail Gorbachev became General Secretary of the Communist Party. He was younger (in his 50s, versus the aging leaders before him), from a farming region (Stavropol in southern Russia), and had visited Western Europe. He could see the gap between Soviet and Western living standards.

His diagnosis:

• The economy was stagnating.
• The technology gap with the West was dangerous.
• The system was losing legitimacy — people no longer fully believed the official story.

His remedy came in three big slogans.

Perestroika – economic restructuring

Perestroika literally means “restructuring.” Gorbachev wanted to:

• give more autonomy to enterprises,
• allow some private and cooperative activity,
• make money and profitability matter, at least somewhat.

This led to:

• The legalization of cooperatives — small private or semi-private businesses in services, trade, and production.
• Laws giving state enterprises more freedom to choose suppliers and buyers.

But the deeper system — soft budgets, political protection, weak bankruptcy — stayed. So you got hybrids:

• Semi-private firms could buy goods at low state prices and resell them at higher quasi-market prices.
• Managers and officials could divert resources into private channels and profit.

This increased corruption and inequality before it produced visible efficiency gains. Ordinary people saw new private restaurants and shops, but also saw shortages, price spikes, and obvious enrichment of insiders.

Glasnost – openness

Glasnost means “openness.” Gorbachev loosened censorship and allowed:

• more honest reporting in media,
• publication of previously banned books,
• public discussion of Stalin’s terror, past famines, national grievances.

This had a clear logic: if you want change, you need feedback and truth.

But it also:

• exposed the scale of past and present failures,
• undermined the myths that had supported Soviet legitimacy (“we are building a just society,” “our system is superior”).

People read first-hand accounts of the Gulag, saw the numbers on famine deaths, and watched coverage of Chernobyl. They also saw how far behind the USSR was in consumer living standards. The more truth they saw, the less they trusted the existing institutions.

Demokratizatsiya – limited political pluralism

Gorbachev also pushed demokratizatsiya (“democratization”):

• introducing competitive elections for some legislative bodies,
• creating a new Congress of People’s Deputies,
• allowing more real debate inside the Communist Party and in public life.

This created new political actors:

• reformists who wanted more democracy and market reforms,
• conservatives who wanted to roll changes back,
• nationalists and local elites in the republics who saw an opening to demand autonomy.

From a systems angle, Gorbachev made a dangerous sequencing choice:

• He loosened political and information control (glasnost, elections)
• before creating a clear, functioning market framework with hard budget constraints and stable rules.

So people saw more problems, more open conflict, and more chaos, but not yet more prosperity or order.

Act V – Nationalism, Yeltsin, and the center losing the game

The USSR was always a multi-ethnic empire. The largest republic, Russia, dominated the union institutions, but there were strong identities in:

• the Baltic states (Estonia, Latvia, Lithuania), which had been independent states before being annexed by the USSR in 1940;
• Ukraine, with its own language, culture, and history;
• the Caucasus (Georgia, Armenia, Azerbaijan), with deep national and religious traditions;
• Central Asia, with different languages and Islamic heritage.

Under tight control, these identities were managed, sometimes brutally. Under glasnost, they resurfaced.

In the Baltics, mass movements like Sąjūdis in Lithuania organized for more autonomy and then for full independence. In Georgia and other regions, protests and clashes broke out — sometimes met with force, with demonstrators killed. In Ukraine, debates over language laws, historical memory, and sovereignty intensified.

At the same time, a new political figure rose in Russia: Boris Yeltsin.

Yeltsin had been a party boss in Sverdlovsk (a major industrial region) and briefly a Gorbachev ally, but later became his critic. In 1990, he became chairman of the Russian parliament; in 1991, he was elected president of the Russian Soviet Federative Socialist Republic in a popular vote.

This created a dual power:

• Gorbachev: President of the USSR, trying to save a reformed union.
• Yeltsin: President of Russia, the biggest republic, increasingly focused on Russian sovereignty and undermining all-Union institutions.

From a game theory perspective, the USSR turned into a multi-player game between:

• the center (Union leadership),
• the republics (especially Russia, Ukraine, Baltics),
• and internal factions (reformers vs conservatives).

The key move Gorbachev tried was a new Union Treaty:

• It would turn the USSR into a looser federation.
• Republics would get more control over their resources and laws.
• The goal was to keep the basic structure together by decentralizing.

The problem: the moment you openly admit “we might accept a looser union,” you also implicitly admit that leaving is possible.

Republic elites now had optionality:

• They could sign the new treaty.
• They could hold out for more concessions.
• Or they could push for full independence and blame Moscow for any turmoil.

Yeltsin used this to strengthen Russia’s position:

• He pushed through Russian laws that claimed precedence over all-Union laws.
• He built his own political base separate from the Communist Party.
• He signaled to other republics that he might accept their sovereignty — but on terms where Russia still expected to be the center of gravity.

The Russian elite didn’t suddenly become anti-imperial democrats. Many of them wanted out of the Soviet structure that constrained Russia, but they still assumed Russia should lead the post-Soviet space, control the main levers of power, and keep access to the resources and transit routes of the other republics.

The center was being hollowed out from above (by Russia as a quasi-successor empire) and from below (by other republics and public opinion).

Act VI – The failed coup and the tipping point

By mid-1991, the situation was unstable:

• The economy was in chaos: shortages were worsening, inflation pressures were rising, and the budget was under severe strain.
• Moscow’s authority over the republics was weaker than ever.
• The security apparatus and parts of the army were frustrated; many senior officials felt the country was “falling apart.”

The new Union Treaty was scheduled to be signed on August 20, 1991. For hardliners in the party, army, and KGB, this treaty would finish their world:

• It would strip the center of much of its power.
• It might start a chain reaction of secession.
• It could eventually threaten their positions, status, and even personal safety.

So a group of them decided on a coup:

• They declared Gorbachev “incapacitated” while he was on vacation in Crimea.
• They announced a “state of emergency” and formed the State Committee on the State of Emergency.
• They sent tanks into Moscow and other cities.

Their model was older Soviet interventions:

• In Hungary in 1956, when Hungarian attempts to leave the Soviet orbit were crushed by tanks and thousands were killed or fled.
• In Czechoslovakia in 1968 (the “Prague Spring”), when a liberalizing communist government was overthrown by a Warsaw Pact invasion.

But this was not 1956 or 1968 anymore.

Several key things had changed.

1. Legitimacy had eroded faster than fear

Decades of propaganda might make people cynical, but glasnost had blown the doors open:

• Mass graves, prison camp memoirs, famine histories — all were now public.
• Chernobyl and Afghanistan had shown the cost of secrecy and incompetence.
• The Communist Party looked less like the vanguard of history and more like a tired, corrupt bureaucracy.

The coup plotters tried to talk about “saving socialism” and “restoring order,” but the words had lost their emotional force.

2. The information environment was different

Unlike in 1956 or 1968:

• Soviet citizens now had more independent media, even if still limited.
• There were fax machines, photocopiers, foreign radio, and some primitive computer networks.
• Information about resistance, Yeltsin’s stance, and divisions in the army spread quickly.

You can’t control a narrative as easily once you’ve partially liberalized it.

3. The agents didn’t fully obey

The coup leaders needed the agents — army commanders, KGB officers, regional leaders — to carry out orders even if they were reluctant.

Many hesitated:

• Some units refused to storm the Russian parliament building where Yeltsin and his supporters were barricaded.
• Officers worried about being recorded in history as those who shot civilians in Moscow.
• Some sensed that the coup was weak and might fail, and they didn’t want to back the losing side.

Without decisive action, the coup unraveled quickly.

Once it failed, the psychological effect was huge:

• The Communist Party’s authority was shattered.
• Conservatives in the state and security services were discredited.
• Yeltsin, who had stood on the tank and publicly opposed the coup, emerged as the main political figure.

In the following months:

• Republic after republic declared or confirmed independence.
• Yeltsin banned the Communist Party in Russia.
• Negotiations shifted from “how do we fix the union?” to “how do we manage the breakup and who inherits what?”

In December 1991, the leaders of Russia, Ukraine, and Belarus met in a residence in the Belavezha Forest in Belarus. They signed what became known as the Belavezha Accords:

• They declared that the USSR no longer existed as a subject of international law.
• They created the Commonwealth of Independent States (CIS) as a looser association.

For Russian leaders, CIS was not just a friendly club. It was a way to:

• keep economic ties (especially energy, pipelines, and trade flows) under Moscow’s influence,
• preserve some military coordination,
• and maintain Russia’s status as the core state in the region, even if the Soviet flag was gone.

On December 25, 1991, Gorbachev gave a televised address announcing his resignation as President of the USSR. The red Soviet flag over the Kremlin was lowered and replaced by the Russian tricolor.

On paper, the empire died. In practice, a lot of the habits and assumptions of an empire survived — both in Moscow and in many of the new capitals. The unresolved borders, frozen conflicts, and competing claims that emerged in the 1990s would later show up as:

• the wars in Chechnya in the 1990s and early 2000s,
• the Russo-Georgian war in 2008,
• and the Russian-Ukrainian war, from 2014 to the full-scale invasion in 2022.

The collapse wasn’t a clean break with the past. It was a messy handover from one imperial framework to a looser, contested one.

An empire that had survived World War II, built nuclear weapons, and controlled half of Europe was gone, but the power structures and resentments it created were still very much alive.

What really caused the outcome?

You often hear one-liners:

• “Reagan bankrupted them.”
• “Oil prices killed the USSR.”
• “Gorbachev was naive.”
• “Nationalism destroyed the union.”
• “Communism always fails.”

There’s some truth in each. But if you strip it down to mechanics, several deeper causes stand out.

1. The growth model hit a wall and couldn’t transition

The Soviet model was excellent at forced catch-up:

• mobilizing labor and capital,
• building heavy industry,
• winning a war and an arms race at huge cost.

It was bad at:

• innovation in a complex economy,
• honest information flow,
• decentralized experimentation.

Once the easy gains from industrializing peasants and building basic infrastructure were done, further growth required:

• better incentives,
• more local autonomy,
• more accurate signals.

Instead, the system kept:

• soft budget constraints,
• distorted metrics
• political fear of real markets.

Result: long-term productivity slowdown, rising shortages, and no credible path to higher living standards.

2. Oil money delayed reform and then vanished

High oil prices in the 1970s–early 80s gave the USSR a resource cushion:

• It could import food and technology,
• prop up client states,
• maintain domestic consumption and military spending.

This cushion reduced urgency. As long as dollars flowed, leaders could avoid fundamental reforms and rely on muddling through.

When oil prices fell and production growth slowed, the cushion disappeared. The underlying weaknesses were suddenly exposed, and there was no time left for gradual adaptation.

3. Half-reforms created chaos without clear benefits

Gorbachev opened the political and information space (glasnost, elections) and partially liberalized the economy (cooperatives, enterprise autonomy), but:

• he didn’t quickly establish hard budget constraints,
• he didn’t create strong legal and financial institutions to support markets,
• and he left a lot of power in the hands of old structures that had no interest in honest adjustment.

So the system got:

• more visible corruption,
• price distortions,
• rising inequality and shortages,

without a clear, functioning new order. People saw the costs of reform before any gains, which eroded support.

4. The union turned into a multi-exit game

Once glasnost and demokratizatsiya empowered republican elites and public opinion:

• The Baltics wanted independence.
• Ukraine and others wanted real sovereignty.
• Russia (through Yeltsin) wanted to stop subsidizing others and control its own resources — while still expecting to be the center of a Russian-led bloc.

The new Union Treaty process made exit thinkable and legitimate. Everyone could see that others might leave. In such a situation, the rational move for many elites was to secure local power and assets rather than risk being left inside a shrinking, unstable center.

The Belavezha deal and creation of CIS were not just about freedom; they were also about who inherited the Soviet state’s assets, power, and levers of influence. Russia positioned itself as the legal and geopolitical heir — and has acted that way since.

5. Legitimacy ran out faster than coercion could be ramped back up

Glasnost destroyed a big chunk of the regime’s ideological legitimacy: people discovered or re-discovered the scale of past crimes and present failures. At the same time, the leadership was unwilling — and probably unable — to return to full-scale Stalin-style terror.

That left the center with:

• not enough legitimacy to attract loyalty,
• not enough raw fear to force obedience.

In that state, a multi-national empire is hard to hold together.

The failed coup didn’t cause the collapse. It exposed that the system no longer had a workable combination of legitimacy, coercive capacity, and economic performance.

🧠 Mental models & lessons

1. Soft budget constraints

Idea: When people or organizations expect to be bailed out no matter what, they behave differently. They take less care with costs, quality, and risk.

In the USSR: State enterprises were almost never allowed to go bankrupt. Losses were covered, targets were adjusted. Even under perestroika, political pressure to “save jobs” kept the budget soft. Managers learned to lobby and plead rather than reform or experiment seriously.

Lesson: If you always rescue failing units — in a company, a banking system, or a state — you build up structural rot that eventually becomes too big to carry.

2. Goodhart’s law

Idea: “When a measure becomes a target, it ceases to be a good measure.” People optimize for the metric, not the underlying goal.

In the USSR: Plan indicators like tons of steel, number of shoes, or gross output decided promotions and bonuses. Factories gamed these metrics — producing heavy but useless goods or uncomfortable shoes. Official statistics looked fine while people faced shortages. The map (numbers) looked healthier than the territory (actual life).

Lesson: You can’t run complex systems with simplistic KPIs without creating perverse behavior. The more power a metric has, the more effort will go into gaming it.

3. Catch-up vs frontier growth

Idea: It’s easier to grow fast when you’re far behind and can copy existing technologies and reorganize labor. It’s harder when you’re near the frontier and growth depends on innovation and good institutions.

In the USSR: The system worked for forced industrialization from a poor base. It failed when the job switched from “build basic industry” to “innovate and manage complexity.” By the 1970s, the same centralized tools that had delivered growth earlier were now an obstacle.

Lesson: Strategies that work at one stage of development can become constraints at the next. Successful systems have to reinvent their institutions when the growth engine changes.

4. Legitimacy vs coercion

Idea: Political orders rest on some balance of people believing in the system (legitimacy) and fearing it (coercion). Coercion without legitimacy is expensive and brittle; legitimacy without any enforcement is naive.

In the USSR: Stalin ruled mostly through terror. Later leaders tried to rely more on material improvements and ideological belief. Glasnost exposed lies and crimes, shredding what legitimacy remained. But the state could no longer use extreme repression without risking rebellion. The balance collapsed.

Lesson: If you reveal deep failures and crimes in a system, you need a credible new story and real improvements to replace the old legitimacy. Just exposing the truth without building a new basis of support can be destabilizing.

5. Systems thinking: feedback loops and tipping points

Idea: In complex systems, small changes can be amplified through feedback loops, and systems can suddenly shift to a new state after crossing a threshold.

In the USSR: Glasnost triggered a loop: more openness → more criticism → weaker party → more openness. Once nationalist movements and republic elites gained momentum, each declaration of sovereignty made others more likely to follow. The failed coup was the tipping point where enough actors decided the old system was finished and acted accordingly.

Lesson: “Gradual reform” is not always gradual. If you weaken stabilizing forces faster than you build new ones, you might push the system across a threshold where collapse becomes self-reinforcing.

This article was produced with AI assistance and human editing.