30 Years of Reforms in Former USSR: Is the Market Economy Helping?

(15 July 2021) The dissolution of the USSR back in 1991 led to the emergence of 15 independent states, which then began a rapid transition from central planning to a market economy. Without getting into the still-ongoing debate about the collapse of the USSR and the need for this economic transition, let's take a look at the results of 30 years of reforms in the Former Soviet Union (FSU) countries by the numbers.

We took 1990-2019 data for three indicators to estimate the impact of market reforms: gross domestic product (GDP), which shows the strength of the economy; GDP per capita, which is a main indicator of standard of living; and change in population, which shows the ability of a socio-economic system to reproduce human capital. We also examined the relative global economic power of the former USSR countries by measuring how the 15 states' share in world GDP has shifted in the past thirty years.

• Of the FSU countries, Georgia, Armenia, and the three Baltic states— Estonia, Lithuania, and Latvia — have most fully westernized their economies, while Turkmenistan, Tajikistan, Ukraine, and Uzbekistan have introduced the fewest market-style reforms.
• The economies of the most FSU countries were larger in 2019 than they had been in 1990, and the standard of living — judging by the GDP per capita — had also improved compared to the Soviet past for 13 of the 15 countries.
• However, the global economic power of the former USSR countries, measured by share in world GDP, was cut nearly in half — from 9% to 5.3% — between 1990 and 2019.
• The Baltic states, which integrated into the European Union, have achieved the highest standards of living among FSU countries, based on per-capita GDP. However, the loss of 15% to 28% percent of their populations, which is beyond what can be explained by demographic trends alone, raises questions about these countries' economic achievements.
• Economic reforms can be considered fully successful in only four Central Asian FSU countries: Kazakhstan, Turkmenistan, Uzbekistan and Azerbaijan. These countries have experienced growth in all three of the indicators we considered. The other 11 countries are characterized by either lower GDP than in 1990, a drop in GDP per capita, or a decreasing population.

It’s worth keeping in mind that the FSU countries have not all embraced a market-based economy to the same extent, or implemented reforms at the same pace.  However, a broad comparison of economic data for these states before the collapse of the USSR and 30 years later provides a general sense of how FSU states are faring under economic reforms.