Capital Changes: Reexamining the Last Two Decades of the Soviet Union

The Soviet Union long appeared to be impervious to the international forces that shaped the capitalist world around it. According to prevailing explanations, the system was both independent and subject to its own laws of development; interactions with the capitalist world were viewed as taking place mostly in the realm of ideas, ideology, and geopolitics.  Read in this light, the decline of the Soviet system during the 1970s and 80s appears simply as a process of failed reform, internal stagnation, economic isolation, and eventual decline. This paper argues that, in actuality, the Soviet Union became increasingly integrated into the capitalist world's structures of commercial exchange and finance during in the 1970s. Having previously engaged the world in barter terms (compensation trade), with only some degree of financial intermediation, the Soviets were confronted with a different mode of exchange in the 1970s and 80s due to increased oil revenues and other forms of trade. As the pace of economic integration quickened, the Soviet system proved incapable of metabolizing the capital coming its way.  Monetary reserves grew along with its credit among western bankers.  The consequent financialization of Soviet interaction with Western capital established the Soviet system within emerging global capitalist hierarchical financial arrangements with consequences that have yet to be fully analyzed.