Breaking the Unbreakable Union: Nationalism, Trade Disintegration and the Soviet Economic Collapse
Leaders from Ukraine, Belarus and Russia sign the Belavezha Accords on 8. December 1991, declaring the dissolution of the Soviet Union and the creation of the Commonwealth of Independent States. Picture credit: RIA Novosti Archive.
A central feature of the planned economy had been the fact that monitoring and control of local elites by the center was incomplete, which left local bodies some degree of discretion. This discretion could be used to tweak the plan, for example by restricting the export of particularly valuable goods to other republics. In normal times this did not happen very frequently, as the prospect of continual interaction placed a limit on the degree to which local elites could exercise their discretion profitably. Once secession became an option, however, it became profitable for local elites to limit the flow of goods between republics. The result was that domestic Soviet trade plunged, supply chains were broken and production plummeted.
The story is supported by a game-theoretical model as well as by data on domestic Soviet trade from 1987 to 1991. Using an adapted version of an empirical gravity model, it is shown that the more likely a republic was to secede- measured by the timing of official declarations of autonomy- the more domestic trade fell. The economic disintegration of the Soviet Union thus predated its official demise in December 1991.
This quantitative effect is strengthened if an instrumental variable procedure is used to account for the possible endogeneity of secessions, for example because republics badly integrated into the Soviet trade system may be more willing to secede. The instrument used is the proportion of textbooks printed in the republican language as opposed to Russian. This reflects the extent of linguistic nationalism present in each locality. Republics who used Russian to a lesser degree were more nationalistic and more eager to secede. They consequently witnessed a stronger fall in trade.
|Marvin Suesse is a PhD student at Humboldt-Universität zu Berlin|
The working paper can be downloaded here.