Some economic context leading up to the dissolution of the Soviet Union: A larger portion of Soviet industrial output was being devoted to the military during the later era of the Cold War which increasingly siphoned away the skilled manpower of Soviet scientists and engineers from other more productive economic sectors. A Western capitalist imposed technological embargo on the Soviet Union also damaged industrial development and innovation.

The Communist Party had developed an overrepresentation of a strata of managers, intelligentsia, and the more skilled technical and professional employees in its membership which gave them disproportionate influence within the Soviet government during a time when Soviet economic growth was slowing down to US levels (after the years of the “stability of the cadres” policy that defined the Brezhnev era) as these strata compared themselves to their American managerial and professional counterparts that had disproportionately benefited from the rise in US national income in the 80s (the smaller income differentials among occupations in the Soviet Union were seen as more tolerable by these strata in previous decades in the Soviet Union as economic growth had been much higher then with all groups seeing their incomes rise at higher growth rates).

There was severe erosion of public economic confidence during the Perestroika reform era from a large rise in inflation that was a consequence of a revenue crisis due to a host of factors that led to excessive reliance on credit from its central bank. The Soviet Union saw significant losses in export revenues from the global oil price collapse from the 1980s oil glut (largely thanks to Saudi Arabia) after structuring its economy into being excessively dependent on the export of oil. Many of Gorbachev’s policies also thoroughly backfired by exacerbating revenue problems with his ban on alcohol that only marginally improved labor productivity while depriving the state of a critical source of revenue in alcohol taxes as well as his promotion of decentralization that allowed for local governments to withhold tax revenues from the central government and Gorbachev’s large reductions in turnover taxes on enterprises under the belief that the managers would make better use of the revenue than the state. The lack of foreign exchange reserves and the ultimate costs of the Soviet-Afghan War and handling the Chernobyl disaster further financially crippled the Soviet Union in its last years. In 2006 Gorbachev wrote "The nuclear meltdown at Chernobyl 20 years ago this month, even more than my launch of perestroika, was perhaps the real cause of the collapse of the Soviet Union."

In contrast to the reform process in China that sought to preserve the dictatorship of the proletariat and the rule of the Communist Party (after installing ideological discipline in the CPC with the Four Cardinal Principles) to more carefully ease the transition with dual pricing systems towards the development of more of a long-term NEP-style transition phase predicated on bringing in foreign investment and forced-technology transfers, Gorbachev naïvely wanted to quickly remake the Soviet Union as a social democracy. Gorbachev's establishment of the Glasnost policies ultimately further empowered Boris Yeltsin’s kleptocratic anticommunist faction (that had grown increasingly larger throughout the years of ideological decay and corruption in the Soviet government after Stalin’s death) at the same time as he was attempting to execute the Perestroika reforms. All of these factors contributed to a significantly more chaotic reform process with older economic mechanisms of planning often being dismantled faster than new economic mechanisms could be put in their place as traditional supply-demand relationships broke down and further contributed to shortages.