Life Cycle of the Centrally Planned Economy: Why Soviet Growth Rates Peaked in the 1950s

In the second half of the twentieth century the Soviet Union experienced the most dramatic shift in economic growth patterns. High post-war growth rates of the 1950s gave way to the slowdown of growth in the 1960s–80s and later — to the unprecedented depression of the 1990s associated with the transition from a centrally planned economy (CPE) to a market one. Productivity growth rates (output per worker, Western data) fell from an exceptionally high 6 per cent a year in the 1950s to 3 per cent in the 1960s, 2 per cent in the 1970s and 1 per cent in the 1980s. In 1989 transformational recession started and continued for almost a decade: output was constantly falling until 1999 with the exception of one single year — 1997, when GDP increased by a barely noticeable 0.8 per cent. If viewed as an inevitable and logical result of the Soviet growth model, this transformational recession substantially worsens the general record of Soviet economic growth.