The Soviets: Sinking Deeper into a Quagmire

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For the new boss, a major challenge is to end the economy's stagnation

While the Soviet standard of living nearly doubled during Leonid Brezhnev's rule, he left behind an economy slipping into deep trouble. Factories are faltering. Farms cannot feed the people. Oil production is peaking and may soon fall. After decades of steady progress, growth has seriously slowed. Still harder times may lie ahead.

Says Columbia University Sovietologist Seweryn Bialer: "In the 1980s the Soviet Union may pass through the worst period since the death of Stalin. Growth rates will be the lowest ever, and the population can expect a stagnating or even declining standard of living. The very stability of the social system may be in question." Observes Marshall Goldman, associate director of Harvard University's Russian Research Center: "There are problems everywhere in the economy. The Russians have to be thinking about what they fought the revolution for. They must be asking themselves, 'Was it worth it?' "

Because of a third consecutive dismal harvest, the Soviets had to import 46 million tons of grain last year, or nearly 20% of their consumption, at a cost of $7 billion or more. At the same time, the sinking market price of oil, the chief Soviet export, cut earnings from energy sales. Result: a hard-currency deficit with the West of $4 billion. To help close that gap, the Soviets sold some 250 tons of gold in 1981 to raise about $3 billion.

The Soviet Union, of course, is in no danger of economic collapse. Its $8 billion debt to the West is minuscule in a $1.5 trillion economy, and the Russian people throughout history have shown a great ability to live with adversity. Moreover, economic problems have not diminished the Soviets' military power. The armed forces get first call on food, clothing, steel, oil, machinery and technology. But the priority given to the military has left the civilian economy sputtering.

Gone are the heady days of the '60s and early '70s, when the average annual growth rate of 4.5% allowed the Soviets simultaneously to augment their arsenal, invest in new factories and improve living standards. Says Economics Professor Holland Hunter of Haverford College: "A very stern experiment in industrialization has been under way in the Soviet Union during the past half-century, and it has worked successfully. But this era has played itself out."

The economy now churns out one-fifth of the world's industrial production, including more steel and oil than any other country. But its per capita output of goods and services ranks below Italy's and is only half that of the U.S. The Soviet Union's reliance on exports of raw materials and imports of machinery, technology and finished products makes it appear more like a Third World nation than an industrial giant. Weaponry, including tanks, fighter planes and assault rifles, is almost the only manufactured product that is of high enough quality to be sold on world markets.