Soviets Come to Senses
15 September, 2011

The developing economic processes were analyzed by the Kremlin insiders and experts, and the conclusion was made accordingly that the situation could not last much longer. The process of capitalization was necessary to start to make people interested in work and the results thereby. Professor Simon Maskharashvili has more.

SM –In 1980’s, construction of a large natural gas pipe-line was planned – from the Urengoy Gas Field of Russia all the way to Uzhgorod  of

the Ukraine. Urengoy is situated on the shores of North Atlantic Ocean and Uzhgorod is right on the border of the former Soviet Union with Eastern Europe. The Urengoy-Pomary-Uzhgorod pipeline was supposed to supply natural gas from Tyumen (Russia) to Europe, which would account for 300 billion dollar annual revenues for the USSR. Thus was created the transcontinental gas transportation system Western Siberia-Western Europe. The Soviet Union did not have the pipes to build the line unless they bought it in Western countries. America obstructed the deal severely. America’s Western European allies, however, refused to bow to U.S. pressure to boycott the pipeline. President Reagan reportedly said ‘Well, they can have their damned pipeline but not with American equipment and not with American technology’. The pipeline was built anyway in the following years, and today it supplies the Russian gas to Europe (practically 80% of the world gas), but at that time America did all its best to stop the grand Soviet project.

GJ – Understood! Can we say that the crisis-ridden Soviet country lost a very good chance to replenish its scanty budget due to the difficulties created by USA?

SM – Very much so! On top of all that, there raged a universal corruption in the Soviet Union – the so called shadow economy.

GJ – Could you please interpret the term ‘shadow economy’?

SM – I certainly will! Let’s do it very briefly and succinctly: People concealed big part of their actual revenues, and a huge amount of money filled their pockets rather than the government’s coffers. But the worst part of money-making of that fashion was that the generated profit was not used on further development of economy but on marry-making and fun life-style.

GJ – Why was the made money squandered so irrationally and was not used as further investment with the purpose of making even more as a result of economic development?

SM – Forget about capital investments! Even private property was not being purchased because the Soviet legislation would not allow private businesses, accumulation of wealth, possession of as much real estate as one desired. Relevant state bodies would get interested and handle accordingly the ‘anti-Soviet style’ of accumulating wealth if they smelled the situation or noticed a Soviet person in this sort of wrong-doing. The investigation was imminent concerning the source of income which was used for acquiring property or any ‘excessive’ amenity. The category of ‘excessive’ would include an expensive house, a country-house and an automobile. Therefore, people wanted to avoid problems with government and they squandered their shadow-economy-produced funds on everyday life pleasures and necessities instead of contributing to the state budget or using it on something valuable like further development of their businesses. In Stalin’s time, people would not dare conceal the revenues and evade taxes. The money made on the side (if at all) was at least used on military constructions and other purposes. In post-Stalinist period the same money was simply drained down the tubes. Without any doubt, the developing economic processes were analyzed by the Kremlin insiders and experts, and the conclusion was made accordingly that the situation could not last much longer. The process of capitalization was necessary to start to make people interested in work and the results thereby. Thus the Soviets came to senses. They should have done it long before, but better late than never!

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