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Why did Communism collapse?

Why did Communism collapse?. Why Did Communism Collapse?. Facts: The USSR from 1945 to 1991 was regarded as a superpower The USSR was a potent force The largest nation on the planet; possessed a strong military force; major deposits of oil, natural gas, coal, and many other strategic minerals

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Why did Communism collapse?

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  1. Why did Communism collapse?

  2. Why Did Communism Collapse? • Facts: • The USSR from 1945 to 1991 was regarded as a superpower • The USSR was a potent force • The largest nation on the planet; possessed a strong military force; major deposits of oil, natural gas, coal, and many other strategic minerals • Many Western leaders feared the USSR would become the dominant world power • The “Cold War” and the Vietnam and Korean Wars were fought to stop the spread of communist ideas • Yet, in 1991, the USSR abruptly disappeared when Russian President Boris Yeltsin declared it ceased to exist after his election • So, why did the Soviet Union collapse?

  3. True/False Clues—Clickers • For much of the 20th century, nearly one-third of the world’s population lived under communism • True • The USSR worked from the premise that only gov’t planners could provide for the overall economic well-being of Soviet society • True • In a market economy, prices send important information to producers and consumers regarding the relative value of g/s • True • In command economies, prices are controlled by the gov’t • True

  4. Solution to the Collapse of Communism Mystery • Turn to a partner and try to determine a solution as to why the USSR collapsed • The Solution: • Under communism, gov’t was thought to have superior information, enabling it to make better economic decisions than individuals might make acting on their own behalf • The rules of the economic system abolished the incentives that ordinarily encourage producers to respond to consumers: • Private ownership • Profit motive • Prices and quantities set by the gov’t distorted the information sent to individuals and businesses

  5. Characteristics of a Command Economy • Public Ownership • Which abolished incentives • Centralized Decision Making • No way to react to millions of prices (which alleviate shortages and surpluses) • Economic Planning • While a gov’t may be “smarter” than any one individual, it isn’t smarter than the entire population combined (a.k.a., the Wisdom of Crowds) • Allocation by Command • Open to corruption and favoritism; lead to much waste

  6. Characteristics of a Market Economy • Private Property • Freedom of Choice • Self-Interest • Profit Motive • Markets and Prices • Competition • Limited Gov’t

  7. Review • Which of the following is NOT a characteristic of a market economy? A. Private ownership C. Competition B. Freedom of choice D. Selfishness • Which of the following is NOT a characteristic of a command economy? A. Public ownership C. Allocation by command B. Competition D. Economic planning

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