An Underground Economy

In Gregory Freeze’s book, Russia: A History, he states that the 1970s were “years of instability and conflict” (445). Seventeen Moments in Soviet History also noted that the Ninth Five Year Plan (1971-75) “illustrated the Brezhnev administration’s attempt to overcome the contradiction between an increasingly urbanized and culturally sophisticated society and the centralized determination of needs.” This new five year plan forecasted higher growth for consumer goods rather than capital goods. Alongside an “inefficient state economy under Brezhnev, a ‘second’ or (“black”) market emerged to satisfy the demand for deficit goods and services” (Freeze, 443).  Also, “virtually every citizen became a de facto criminal in the quest for a more comfortable life;” about “twenty million people worked on the black market to supply the demand for 83 percent of the general population” (Freeze, 443). Participation in the “black” or underground market was very common as Soviet citizens wanted to live more comfortably. 

The desire for “western consumer items such as clothing and music drew young people into the gray area of the second economy.” From The Current Digest of the Post-Soviet Press, Lev Kuklin writes about the jean culture in schools among Russia. He noted that,

“in some Moscow and Leningrad schools our children are divided into three classes according to the sort of pants they wear. The first [or highest] class includes those who [were] lucky enough to wear genuine American, “stateside” jeans with the labels “Lee,” “Levi’s” or “Wrangler.” These jeans [weren’t] sold in stores, and they carry such prestige that their price on the black market has already approached 200 rubles!”

The black market carried a variety of items, foreign and domestic, and targeted younger people. A desire for consumption developed and the idea of consumerism influenced many younger generations.

The video film above contrasts healthy and unhealthy leisure activities of the Soviet youth, and emphasizes the growing materialism among young people.

The underground economy both encouraged and hampered the growth of the Soviet economic system. The system was “more efficient when independent agents circumvented artificial price and production controls, thus buffering average citizens from the inefficient allocation of resources by central planners.” This growth in the unofficial sector far exceeded the  growth in the stagnant official economy. This type of law-breaking had a destructive effect on Soviet society, and undermined the state’s legitimacy.

 

Other References:

Freeze, Gregory L. Russia: a History. Oxford University Press, 2009.

24 Replies to “An Underground Economy”

  1. Nice post! I have always wondered rather or not the black market could have been tamed by Soviet authorities. Like if the Centrally planned authorities successfully switched priorities to consumer goods rather or not this would satisfy many Soviet citizens. Or if this was just the appeal of having restricted foreign things.

    1. Thanks De’Vonte! I’m not sure if the black market could have been tamed because many authority figures also participated in it as well, including some of Brezhnev’s family ( I found this fun fact while reading in Seventeen Moments in Soviet History!) and also the fact that so many people were involved. I don’t believe that it could have been dissolved due to its immense popularity.

      1. Agree 100%! As Claire points out in her post, the black market was essential to keeping the official market functioning and everyone more or less satisfied. The problem IS the command economy – and consumerism itself. We’ve naturalized consumption so much in this country that we don’t really recognize it as a behavior and set of attitudes. There is a shift toward accommodating and even encouraging consumption under Khrushchev and then Brezhnev, but the centrally planned and command controlled economy can never be responsive enough to accommodate consumer demand and preference. That’s why capitalism, which is profit oriented is better suited to meeting the (ever rising) demands of consumption.
        I loved this post, Natalie! That video of the teenagers is one of my favorites from seventeen Moments.

        1. When looking for a visual for my post, the video of the teenagers stuck out to me and I felt inclined to use it! I also agree that today’s youth and society is obsessed with consumption and accumulating lots of ‘stuff’ just because we can and it’s available.

  2. Hi Natalie! I had never heard of the black market in the Soviet Union during this time, so it was really interesting to learn about from your post! It’s wild to me that something like jeans would be on the black market, but I can see how it would be in demand because of the desire for Western consumer items, like you pointed out. Nice job, it was really interesting!

    1. Thanks Lauren! I found it very interesting as well that jeans were a popular commodity within the black market since denim is very common. Cigarettes were also a popular item too.

  3. This is a very interesting in that the younger generations in the Soviet Union, who were expected to be the future of the revolution, were actively circumventing its institutions to gain a level of comfort that could not be achieved through the allotments of the government. I agree that the active black market greatly undermined the legitimacy of the Soviet government because it was a clear demonstration that the attempted command economy could barely provide for its people like it was intended to do. People always find a way to provide for themselves. Great post!

    1. Thanks Eric! I agree that when times are tough, it amazes to see how people are able to find ways to provide for themselves and their families, whether legally or illegally. The black market provided Soviet citizens with the ability to live comfortably, something the command economy could not.

  4. Hi Natalie, this is a very interesting article I had no idea the Soviet’s used the black market. I wonder how much this contributed to the economy as a whole, any ideas? We’re there any repercussions for being caught buying and selling items through the black market?

    1. Thanks Max! I’m not sure how much the black market contributed to the economy as a whole since it was illegal but it helped citizens maintain a comfort that the command economy couldn’t give them. As for repercussions, a section in the Seventeen Moments in Soviet History says participating in the black market “[was] on a par with criminal activities such as the narcotics trade and moonshine liqueur.” It also adds that there was a gap between “Soviet consumers’ rising expectations or sense of what they needed and what was provided through the mechanisms of the state.” This underground economy provided a solution to the dissatisfaction of the Soviet economy.

  5. Amazing post Natalie! I have read about the influence of the black market in the Soviet Union but I never thought that the black market provided services to the majority of the population like this. I guess this was the beginning of the age where the Soviet citizenry were willing to accept openness

    1. Thanks Chris! I also was surprised by the popularity of the black market in the Soviet Union during this time. Due to a gap between what the Soviet citizens expected versus what they received from the command economy, this prompted the black market’s popularity despite its dangers.

  6. Natalie, great job on covering the actions of people who want the same things that others have. It demonstrates the resilience of the common folk, that lived in the larger Russian cities, that had ways of getting these luxuries even under strict governmental control.

    1. Thanks Tom! During the course we have seen time and time again the resilience of the Russian citizens and their ability to provide themselves. Like you said, this is yet another example of their resilience.

  7. Hey Natalie, this was such an interesting read! I had no idea just how coveted a pair of Levi’s were in urban Russian youth culture, and it really does show how human nature is to yearn for the things that others possess. It’s also sad but amazing that the black market economy was doing better than the actual economy, and really emphasizes how flawed the system was.

    1. Thanks Rory! Consumerism was an up-and-coming phenomenon that many the spiked interest in many younger citizens. I agree it’s amazing that a second economy was able to emerge alongside the command economy.

  8. Natalie, I found this post very interesting. Thank you for sharing this. The target market that the black market had was understandable as it was easier to draw in the younger generation, especially since many of them longed to have the fancier clothing to raise their status in society. I also liked the fun fact that Brezhnev was very involved in the black market along with other public officials. No wonder this market hindered the success of the main economy.

    1. Thanks Josh! I agree that younger generations wanted to live more comfortably than their parents and grandparents since there was a variety of products available. I found the fun fact about Brezhnev very interesting but not surprising because during the course we’ve seen multiple accounts about public officials undermining their own policies and reforms.

  9. Hi Natalie! Lovely post. I was just wondering, were there any attempts made by the Soviet government to try in reel in the Black market at any point in time during Brezhnev’s reign? or was the government just so stagnate and unwilling to deviate from the norm that was created to do anything about it?

    1. Thanks Alyssa! I discovered from the Seventeen Moments in Soviet History that although participation in the black market “[was] on a par with criminal activities such as the narcotics trade and moonshine liqueur,” the majority of citizens became “a de facto criminal in the quest for a more comfortable life.” I’m sure the Soviet government tried to limit some aspects of the black market but many were involved in it themselves, even some of Brezhnev’s family, so I don’t believe they necessarily wanted to eradicate the underground market due to personal gains.

  10. Nice article! I really never thought much of the black market and its impact with the Soviet Union but it makes so much sense. Their centralized economy would of just lacked what the people would actually want. It also provided a nice change in life style for the younger people.

    1. Thanks Kellan! I also didn’t think much of the black market but it certainly made a big splash and gained popularity among the Soviet citizens. This second economy offered them what the command economy couldn’t.

  11. Natalie, good post! It’s crazy how the black market was responsible for many of the consumer goods in the Soviet Union. I wonder how the government felt when demand for western consumer goods started to grow!

    1. Thank you! I’m sure the Soviet government wasn’t too thrilled to have an underground economy undermining them and offering western style commodities but these styles were pretty popular among the consumers.

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