chapter  11
49 Pages

The dark matter of economic growth

One of the most profound transitions witnessed in modern times was the fall of the Soviet Union. The connections to this book may not seem obvious, yet they are numerous and profound.

The most obvious connection concerns underlying economic philosophy. Central planning proved a disastrous way to run an economy. Its cumulative problems could for some decades be masked by the enthusiasm of the post-Second World War reconstruction imperative and by resource wealth – above all coal, oil and related gas. The previous chapter explained in general how it is possible for systems to get stuck on the wrong track; our fi rst chapter underlined that dealing inadequately with environmental damage impairs both lives and economic development. Soviet central planning fell into both these traps. Massive resource-based and centralised industrialisation and agricultural ‘modernisation’ led to perverse outcomes. Fantastically ineffi cient use of energy undermined the value of the region’s huge fossil fuel resources and exports. Accumulating environmental damage fuelled discontent and declining productivity. The collapse of oil prices in the 1980s exposed the fragile fi nancial basis of foreign and domestic security, and weakened the state’s ability to provide a minimum standard of welfare. All this paved the way for the subsequent political revolutions.