The Soviet economy today is stagnant and offers little hope for sustained growth. In fact, there have been signs that its future prospects may become even bleaker: last year, a large number of Soviet cities, when faced with severe food shortages, introduced rationing which sparked numerous strikes and demonstrations. Although these and other disturbances do not prove that the economy is on the verge of collapse, they do suggest that it is in critical condition…

“The traditional policy of stagnation cannot last indefinitely. Another series of bad harvests…could further fuel enough demoralization and discontent to threaten the very ability of the system to survive. Although the future of Soviet harvest, particularly grain, remains uncertain, it is likely that the system will continue to favor stability over change and that conservative forces will check the initiatives of the few who desire significant reform. Thus, the Soviet leadership might possibly checkmate itself into disaster.”

“Andropov: One Year Later”

January/February 1984

Unlike those in business or medicine who are fired or face malpractice suits when they make mistakes, academics and scholarly pundits almost never are called to account when their predictions bear no relationship to what actually happens. Thus when Jerry Hough, a Sovietologist at Duke University, insisted that the coup attempt against Soviet Premier Mikhail Gorbachev in August 1991 was all part of Gorbachev’s clever ploy for power, the fact that it was anything but, evidently bothered neither Hough nor his employer. He simply went on to make more—as it turned out, equally erroneous—predictions.

Wrong or Right

While Professor Hough was further off base than most of us, we have all “got it wrong” one time or another. But as far as I know, no academic has lost tenure or been sued for malpractice because of a faulty forecast. In fact, it usually is considered poor form even to mention a professor’s past mistakes. (It is all right to penalize students, but not their teachers.)

No wonder then when the Harvard International Review (HIR) editor asked me to reexamine my past predictions, I felt an initial panic. I had no recollection of what my prediction in the journal had been when I had written the last article, but I said to myself, “Oh my god, I am going to be embarrassed. What a dirty trick.”

Naturally it was with considerable excitement that I read what I had actually written and saw that I was very much on target. Then the thought crossed my mind that maybe I should rent a store-front and hang out a sign “Fortunes Told.” My contribution to the HIR was a 1983 roundtable discussion, before Gorbachev came to power in 1985, and my assertion that the Soviet economy was in “critical condition” was something on which most observers both inside and outside the USSR did not agree.

As evidence, my book The USSR in Crisis: The Failure of an Economic System, which also appeared in 1983, was harshly attacked by what were regarded as “good scholars.” There was even a “truth squad” that felt obliged to refute my book at several academic meetings around the United States. In retrospect, I guess I should have felt flattered by the attention, but at the time I was anything but. They focused on what they regarded as the book’s misguided approach. “It is the US economy that is in crisis, not the Soviet economy,” they insisted.

Hindsight for Hewett

Adding to the clamor, Ed A. Hewett, a senior fellow at the Brookings Institute, reviewed the book for the July 10, 1983, edition of the New York Times. In his view, “Mr. Goldman’s fixation on crisis and failure prevents him from conveying a sense of the strengths of the Soviet economy that have counterbalanced weakness in economic institutions. And he sometimes sees failure where there are none—for instance in Soviet agriculture. . .This kind of overemphasis on weakness in the Soviet economy could easily lead to ill-conceived Western policies toward the Soviet Union…[and lead us] to underestimate its ability to compete with us in a new arms race.”

Hewett went on to become the USSR specialist in US President George H.W. Bush’s National Security Council, an advisor on arms control, and the architect of what is now called the “Chicken Kiev Speech.” In an embarrassing bit of timing, President Bush misguidedly went to Kiev in August 1991 to urge Ukrainian Rada members to stand by Soviet Premier Gorbachev just days before the coup and what became the imminent disintegration of the USSR. Despite Hewitt’s assumptions, the USSR could not keep pace with the United States in the requirements of the arms race. If ever there was an example of malpractice in economic advice, this was it.

Admittedly, my own prediction in the HIR article was not entirely on target. I predicted that the Soviet Union in the future would “favor stability over change.” That certainly was true of the USSR under Andropov in 1983, Konstantin Chernenko in 1984, and Mikhail Gorbachev at least from 1985 to 1987. In 1987, Gorbachev did begin to seek change.

But as I also anticipated, conservative forces within Russia, including those in the Politburo, resisted. The climax of course came in August 1991 when, driven by their opposition to Gorbachev’s changes, conservatives were so angered that they launched a coup attempt.

Early Warning Signals

In his instructions to us, the HIR editor requested that we explain the reasoning that underlay our predictions. My assertions in both the HIR and USSR in Crisis were based, as I wrote in the HIR, on the fall in officially announced growth rates. By the 1980s, even trophy industries such as steel were beginning to falter. If the Soviets were having trouble sustaining steel output, a centrally planned favorite, how much more trouble they must have faced in the sectors that did not lend themselves to central planning, such as computers, electronics, services, software, and biotechnology. These sectors were subject to rapid innovation, change, and obsolescence—all enemies of central planning. This was more the domain of venture-capital investors, something precluded in a communist state.