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The Defence Sector in the Economy of a Declining Superpower: Soviet Union and Russia 1965-2000


  • Christopher Mark Davis
  • Christopher Davis


The Soviet Union was able to develop a large military-industrial complex and become the world’s second superpower despite the small size of its malfunctioning planned economy because defence was given high priority status and special planning, rationing and administrative mechanism were used to ensure attainment of national security objectives. However, in the period 1976-85 the effectiveness of priority protection diminished and defence institutions experienced more of the problems typical of the shortage economic system. The heavy defence burden also created growing difficulties for the civilian economy. The attempts by the Gorbachev government to reform the defence sector and improve defence-economic relationships during perestroika (1985-91) uniformly failed. For most of the transition period, the Russian military-industrial complex has been adversely affected by its low priority status, drastic cuts in defence spending, instability of the hybrid politico-economic system, and negative growth of the economy. The armed forces and defence industry have been reduced in size and their outputs of military services and equipment have fallen to low levels. Nevertheless, the Russian armed forces still have over one million troops, significant stocks of sophisticated conventional weapons, and a large nuclear arsenal. Since mid-1999 the priority of the defence sector has been raised significantly, defence spending has increased and the new government of President Putin has adopted ambitious plans to revive Russian military power by 2010. Economic factors will be of crucial importance in determining the success of this effort.

Suggested Citation

  • Christopher Mark Davis & Christopher Davis, 2000. "The Defence Sector in the Economy of a Declining Superpower: Soviet Union and Russia 1965-2000," Economics Series Working Papers 8, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:8

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    More about this item


    Soviet Union; USSR; Russia; defence economics; defence sector; military-industrial complex; defence expenditure; defence budget; defence burden; arms race; armed forces; logistics; defence industry; military RDT&E; arms trade; national security; conversion; disarmament; economic systems; defence planning;

    JEL classification:

    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-
    • P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects
    • P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions


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