On the national question, Andropov took a tack that differed from the complacent optimism of previous General Secretaries and from the later indifference of Gorbachev. Far from assuming that socialism had solved these problems, Andropov asserted that national distinctions lasted much longer than class distinctions and that national self-awareness actually increased with economic and cultural progress. National problems, Andropov said, were “still on the agenda of mature socialism.”148 He called for the rectification of past and present policies that injured national sensibilities but insisted on an intolerance of national arrogance, conceit, or exclusiveness.149 Andropov specifically called for a kind of “affirmative action” to “insure the proper representation of all nationalities” in all Party and government bodies.150 Such a call by a Communist leader might seem entirely ordinary, but it contrasted sharply with Gorbachev’s abrasive bumbling of national problems. Indeed, the eruption of nationalist sentiment that occurred in the mid-1980s served as much as a measure of Andropov’s prescience as of Gorbachev’s blindness.
There is every reason to think that Andropov’s approach to reform would have worked. As a Communist leader, he had everything going for him except his health. Such cynics as the historian Dmitri Volkogonov asserted that Andropov’s course was “ineffective.” In all fairness, however, Andropov accomplished a great deal in his fifteen months, which in any case was a very short time to reform an entire society. His accomplishments were all the more impressive considering that illness consigned him to a hospital bed for half of this time and his successor lacked the capacity to continue what Andropov had started. Volkogonov acknowledged that the next General Secretary, Konstantin Chernenko, was “a total mediocrity, hardly educated, without any of the vision needed by a leader of Party and state.”151
Some of Andropov’s economic experiments did continue after him, but other reform ideas remained on the drawing board. Others barely got started. Most of them withered on the vine during Chernenko’s two years in office. Consequently, most of the problems of the economy, Party, and foreign relations that had worsened under Brezhnev remained. When Gorbachev assumed the office of General Secretary in 1985, other Communists knew he favored reform but the path Gorbachev would choose remained a mystery, most likely even to the new General Secretary himself.
3. The Second Economy
The USSR’s shadow economy and the rest of its underground—misappropriation, corruption, organized crime—in the end contributed to the system’s collapse….[It] culminated in subornation of much of the formal apparatus of rule and control within the party-state hierarchy and in the severance or fraying of vertical lines of communication and authority, as it reoriented the nomenklatura’s private (or group) interests and loyalties toward the new, nonofficial sources of wealth and power—with dire consequences for empire, union, system, and economy. —Gregory Grossman152
The emergence and rapid growth of the second economy since the mid-1960s contributed to the deepening economic crisis of the late 1980s and the ultimate disintegration of the Soviet economy. —Vladimir G. Treml and Michael Alexeev153
The shadow economy alleviates shortages in the consumer markets and, at the same time, provokes their growth….The presence of shortages produces the growth of organized criminal economic groups and the latter lead to socio-economic and political destabilization of the society.-–Tatiana Koriagina154
What accounted for the persistence of two political tendencies within the CPSU? To some extent, of course, ideas have a life of their own and because of tradition and sentiments persist after the evaporation of their original purpose. More to the point, as long as capitalism and socialism existed side by side, ideas from one system were bound to penetrate the other. In the 1970s and 1980s, the extreme free market ideas of Milton Friedman of the University of Chicago and Jeffrey Sachs of Harvard enjoyed a worldwide resurgence, and the leaders of such diverse countries as Chile, Bolivia, Argentina, Britain, and Poland adopted them as a cure-all for inflation and stagnation. At the same time, some in the Soviet Union became attracted to these ideas. Such free market thinking within the Soviet Union dovetailed with the social democratic trend that had long existed.
In order for such ideas to persist in Soviet society and in the Communist Party, more than tradition, sentiment and external forces must have been at work. A section or stratum in Soviet society must have had more than an intellectual stake in those ideas. For the early decades of Soviet history, the class with such a stake was the peasantry, supplemented as well by those from a peasant background and former capitalists, so-called NEP-men, who hoped to regain their pre-revolutionary status. As the Soviet Union transformed the peasants into agricultural workers on state farms and collective farms and created a huge working class by industrializing, the peasant basis for quasi-capitalist ideas declined. The following figures reflected this transformation: the peasantry represented 83 percent of the population in 1926, but 20 percent in 1975. The workers in industry, building and transportation represented 5 million people in 1926 and 62 million in 1975.155
After 1953, a new economic basis for bourgeois ideas began growing within socialism. This basis was the population engaged in private economic activity for personal gain, in a so-called second economy that existed beside the first, socialist economy. At first, the very existence of a second economy was disguised by its interpenetration of the first or socialized economy. The second economy usually did not involve a separate class of people, but rather workers and farmers in the primary economy who spent time making money on the side in legal or illegal, private activity. Increasingly, however, in the post-war years, the second economy embraced more and more people and accounted for more and more of their income and in effect re-created a petty bourgeois stratum. The most corrosive product of the Khrushchev and Brezhnev eras resided precisely in this second, private economy and the stratum that benefited from it. Private economic activity never totally disappeared under socialism, but after being restrained under Stalin, it emerged with new vitality under Khrushchev, flourished under Brezhnev, and in many respects replaced the primary socialist economy under Gorbachev and Yeltsin. The second economy had profound and widespread negative effects on Soviet socialism. It created, or re-created, private sources of income and systems of distribution and production. It led to widespread corruption and criminality. It spawned ideas and sentiments to justify private enterprise. It became a source of funds for critics and opponents of the system. It provided a material basis for social democratic ideas.
Before detailing the consequences of the second economy, it is first necessary to define it, discuss its treatment in socialist literature, describe its various manifestations, recount its history, and estimate its size. We define the second economy as economic activity for private gain whether legal or illegal. There are two good reasons for including both legal and illegal private moneymaking. First, this is the definition used by Gregory Grossman and other students of the second economy, and hence using a consistent definition will reduce confusion when referring to their studies.156 Second, private economic activity fosters relations, values, and ideas that are different from collective economic activity. As such, it can pose a danger to socialism. The Soviets recognized this during the NEP period, as have the Cubans in relationship to the foreign investment and private activity allowed during the so-called Special Period. Because of this, widespread private economic activity, whether it is legal or illegal, can pose a problem for socialism.