The Soviet Union Underground Economy

In the 1960s, the Soviet Union began prohibiting typical goods, common to most middle class consumers, that prompted most citizens to seek goods and supplies via other means. An underground market came to fruition to meet the people’s demands.

The government began penalizing people for purchasing common necessities, “Involvement in the underground economy had become a fact of Soviet existence by 1980. Economic activities regarded as normal in market economies not only were prohibited under Soviet law, but also carried heavy penalties. The acquisition of consumer services (repairs of appliances and autos, medical services) and residential housing, the resale of scarce consumer goods, trade in western consumer goods such as blue jeans or cigarettes were on a par with criminal activities such as the narcotics trade and moonshine liqueur. Virtually every citizen became a de facto criminal in the quest for a more comfortable life” (Geldern).

Anything citizens couldn’t get their hands on on the Black Market, the Soviet Union hacked up the prices for most other goods. But it did not necessarily help the Soviet Union, “The underground economy both aided and impeded the growth of the Soviet economy. 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. Growth in the unofficial sector far outstripped growth in the stagnant official economy. Yet obligatory law-breaking had a corrosive effect on society, and undermined the legitimacy of the state” (Geldern).

Following the fall of the Soviet Union, most of the citizens who participated in the Black Market turned into criminals and racketeers.

Sources:

Underground Economy

https://www.ucis.pitt.edu/nceeer/1995-809-04-Alexeev.pdf

http://www.jstor.org/stable/151932?seq=1#page_scan_tab_contents

7 thoughts on “The Soviet Union Underground Economy

  1. Interesting post. The black market would continue to be an issue and become even more entrenched in society with the collapse of the Soviet Union.

  2. The black market is such a fascinating topic! (You should fix your blog so that the text isn’t “black on black” — makes it hard to read!). I concur with von Geldern that the black market undermined the official economy but at the same time was essential to keeping it going. When you really needed something to happen, you were glad that the black market was there! Also, since virtually everybody used the black market in some fashion, I’m not sure it’s fair to assert that everyone who did so became a criminal or racketeer after the collapse.

  3. Great post! The Soviet underground economy reminds me of the Nepmen movement in the 1920s that went around government policy to reinstate capitalism. It is interesting that the Black Market actually helped the economy.

  4. Great post. It is not surprising that some form of black market was started since the citizens were being denied certain necessities. Most likely people couldn’t afford the prices the government was offering. What really interested was the fact that if these people were caught, they were treated like this was some form of incredible crime. Overall great post.

  5. No doubt, the black market was one of several reasons for the eventual collapse of the Soviet Union. The emergence of black markets is also a frequent (and warranted) criticism of communism. Beyond damaging the official economy, I like how you mentioned that state legitimacy and overall society is damaged when people frequently resort to black markets for goods.

  6. Great post! The black market is still a huge issue. My grandfather has a National Geographic from 1990 that describes Eastern Germans adjusting to life living alongside West Germans. The reporter interviewed several Eastern Germans who were amazed with how quickly services were provided in Western Germany. I remember one person tried to schedule a delivery date for the car he had just purchased, before the wall came down, but couldn’t accept the delivery date the government had offered, which was 7 years from the purchase date, him because he had a dentist appointment that day.

  7. Nice post, it is interesting to see how the black market both helped and hurt the Soviet economy and that it was such an important part of everyday life.

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