The man who predicted how the Soviet Union would collapse

Igor Yakovlevich Birman has died. I’ve never heard of him before, but I wish I had. He was a Russian economist who from first-hand knowledge saw through the lies and propaganda of Soviet might. He emigrated to America in 1974 where his predictions that the Soviet economy would eventually implode were disbelieved and ridiculed by western ‘experts’. As a director of planning in Soviet factories “he had a profound distrust of official Soviet statistics and believed its economy was smaller and could support far less non-military consumption than most foreign analysts believed,” as his obituary in the Telegraph explains it.

The problem was the American military establishment had as much a vested interest in talking-up Soviet capability as the apparatchiks in Moscow had. The appearance of a new Soviet bomber or missile system at the annual May Day Parade threw the Pentagon into a frenzy of lobbying on Capitol Hill for yet more money for yet more military programmes. The arms race was conducted round a tight circular race track; each new Western bomber spurred the Soviets to produce another. The Pentagon could not allow the idea to gain credence that this race was unsustainable for the Soviets, it would undermine their own programmes. Birman knew the truth and he had to be rubbished.

Paradoxically, Birman believed that the best strategy for the West was to ramp up the arms race and bankrupt the Soviet Union. Instead of giving him the cold shoulder, the Pentagon should have championed him.

The first cracks in Soviet confidence came with the Falkland’s War. Soviet spy trawlers were shadowing our fleet as it sailed south and we feared they were passing intelligence to the Argentines. It turns out they were not, but the Russians watched the whole conflict closely, with mounting alarm. And with good reason. Operating at extended range, against an enemy with modern weapons with the advantage of being dug-in and prepared, and operating close to their homeland with short supply lines, we trounced them. All of our weapon systems worked as advertised, the Harrier jump-jet in particular was an outstanding success shooting down 23 enemy aircraft without loss.

The second blow to Soviet confidence was the First Gulf War when NATO forces demonstrated military capabilities that were simply beyond the Soviet’s dreams. From the stealth bombers that opened up the campaign, to the ‘smart bombs’ that had devastating accuracy, and especially to the Tomahawk cruise missiles. Who can ever forget those television images of cruise missiles flying up the street past the Al Rasheed hotel in Baghdad, using SatNav to home in on their targets. Watch it here

This came just two years after the Russians had to retreat from their disastrous campaign in Afghanistan, beaten and demoralised. It was probably the final nail in the coffin. The Soviets realised that no amount of money would bring their military up to sufficient capability as to challenge ours. They had hit the limit; they could spend no more because the Soviet economy could not take it.

So, back to Birman who predicted as much. Why do I wish I had known more of him? Because everything he said about the nature of the Soviet economy applies to us today. How far can we believe and trust those who run the economy? Those who ran the Soviet factories, and the apparatchiks in Moscow, are hardly different to those who run our financial centres on Wall Street and the City of London, and the regulators who oversee them. There is a vested interest in talking up their importance to the economy and how good a job they are doing. But I don’t believe any of it.

What we really need is a return to fundamental capitalism. Pure free trade. We need to get away from the culture of unearned bonuses. If you do a good job you get to keep your job, that should be the reward. We need to return to an economy where wealth creation is the objective. If we don’t create sufficient wealth, then just like the Soviet Union all else fails. We need to make it profitable to employ people in this country, not export jobs. We need to reduce taxation so a higher proportion of what we earn is ours to keep and spend. Above all, like Birman, we should trust what we see first hand, so-called ‘anecdotal economics’ (or as Professor Patrick Minford puts it, ‘rational expectation’) and act on it. Otherwise if we are deluding ourselves as the Soviets did, our economy is at risk of imploding as well.

Igor Birman’s obituary in the Telegraph

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