OVER-ALL GROWTH OF THE SOVIET ECONOMY IN 1956 (ST PC 30-43)

Created: 2/2/1957

OCR scan of the original document, errors are possible

G& ONLY wiim Tablw Hre Removedy-

27

MEMORANDUM FOR: Deputy Director, Intelligence

Over-All Growth of the Soviet Economy6

.it* Sir^on" erowth of the Soviet economy6 was consistent

S owindustries wore laggingby the exceptionally good agricultural2 percent national income was roportod. Total industry cent. heavy4 percent, lightndustry and of producer goods was about

ono-nalf of one percent above, and light industry the sarno amount oelow, the annual averages required to meet0 goals. investmentubstantial Increase but changes incategories make precise evaluation impossible at this time. It is clear, however, that misdirection of investment resources

ag! wero PriBarlly responsible for the production shortfalls in coal, ferrous metals, and cement. The increase both in the number of workers and employees and of tbo industrial labor forceabor force gain from demobilisation. Industrial labor productivity6 reportedly increasedercent, which is well below the averageercent roquired. The in-

fi? 'i6 flrst tlmeooperative employees in tho labor force is, however, partially responsible for the low growth rate in productivity. Owing to the good agricultural year the supply of foodstuffs improved considerably. Prices in state stores remained stable but colloctivo farm markot prices roportedly declined. The Increase in retail trade probably absorbed most of the lncroased purchasing power of the population.

Soviet Economic Growth

Por

Plan

lUbD

Income

12

Total

16

Industry

17

Industry

cia historical review program release as9

INDUSTRY

PRODUCER GOODS

Progress of heavy industry was uneven and problems appeared in key, mutually lntordepondent, industries which havo almostmet the plan in tho past. Total coal production wasbade under tbe plan at year'a end but quality docllnod as the share of lignite production increased. Crude steel, rolled stoel, and pig iron wereercent short, owingombination of tight ore supplies and failure to complete now blast furnacos, rolling mills, etc. Comont represented the most serious failure: ercentillion tons below plan. Potroleum, natural gas and electric power production were on schedule but energy supplies on the whole continued very tight. Satisfactory to good progress was reportedurabor of important non-ferrous motels but it appears that production of copper and some of tho newer light metals was less than roquired.

Progress.of machine building industries continued generally good, but also with somo important exceptions. The automation program and production of metallurgical, potroleum drilling and refining, and chomical equipment seem to be lagging. Production of diesel and electric locomotives is above plan, and while there were complaints about undorfulf illment in production of agricultural machinery, tho increases reported -were very substantial. With the exception of oloctric motors, output of electrical equipment and electronics continuos to grow rapidly according to plan.

Outputelected

Plan

Pig Iron

(Million Motric Tons)

Crude Steel

(Million Metric

Rolled Steel

(Million Motric

Cement

(Million Metric

Electric Power

(Billion

Coal

(Million Metric

Crude Oil

(Million Metric

-WNFmmrnur

CONSUMER GOODS

Production of processed foodstuffs, toxtiles, footwear,umber of durables generally shoved substantial increases. Two Items which bulk large in Soviet consumption were unsatisfactory; cotton textiles, which showed the effect of the5 harvest, and furniture, which probably was hampered by the extromoly tight supply of timber products.

Production of Selected Consumer Goods

ton;

Cotton Textiles

(Million Meters) 9

Watches and Clocks, All Types (Million Units)

0

0

6

Goods

Footwear

ofCans) 5

(Million Pairs)

CAPITAL INVESTMENT

The plan for capital investments was fulfilled byercent, with failures in construction for the coal industry, construction materials industry, and housing mainly responsible for the underful-fillment. Production shortfalls in these sectors and in ferrous metallurgy are largely explained by considerable underfulfillment of the plans for putting new facilities into operationonstruction of electric power stations was also below plan, but by concentrating on plants scheduled for completion at the expense of new construction, the Ministry met the plan for new electric power capacities. hange in coverage*of investment statistics makes analysis difficult, the announcedercentin the volume of investmentsonsiderable increase and is in accordear targets. However,6 results indioate thatnvestment program is so tightly scheduled that any miscalculations in specific industrialrequirements will Jeopardize fulfillment of production targets. The modest housing goal6 was underfulfilled by aboutercent; onlyercent of the state housing plannedas built The shortage.of building materials in the economy willerious obstacleignificant increase in housing construction

oviet Investment and Construction

""' " '" 1

A Preliminary Interpretation ol Investment Data Reported:

PI. 6

Centralized Capital Investments

Decentralized Capital Investments

Possibly Modernization Expenditures

State and Cooperativb Investments

Including Modernization;nd Excluding Kolkhoz Investments

Construction*

PI. 6 Act. 5th

PI,

FYP PI.

Urban 29 26

"** ) 10

) 36

of sq. m. of total space.cooperatives.

in the construction industry the high rate of increase ofercent shown

The change

the wage structure at the beginningntensifying the incentive character of the wage system and "improving laboras partially responsible for the maintenance of of this rate. The rate was well above the required annual average for the 6th FYP and the actual average for the 5th Five Year Plan despite the shortened week.

At the same time the rate of increase In industrial labor productivityercent was below5 rateercent. It also failed to attain the average annual increase required by0 goalercent. The inclusion of the members of cooperative artels in tbe numbers of workers and employees probably depressed the industrial productivity figure and mayevision in the plan goal. Improvement in the rate of increase in industrial productivity may be expected as the reorganization of the wage structure widens to include more of the industrial sector, where it began on an experimental basis only latend as tho rather large increment in employment6 becomes assimilated.

Labor Productivity Io The USSR: Annual IncreasesInpiicd Annual Average Increases For Fifth aod Sixth "Five-Year

Increases Over Precediag Year (In %)

Avorage Increases (in %)

X7 Based0 goal planned for industrial labor force probably exclusive of members of industrial cooperatives.

LABOR FORCE

The Increment to workers and employees in the national economy6illion,illion more The book-kooping transferroducer cooperatives artel members accounts for part of this Increase. Part of the remaining difference is probably attributable to demobilized service men entering tho ranks of workers and employees The total difference between56 increments is reflected exactly in the increments to the "productive" branches of the economy, stateconstruction, state farms, traneportation, and communications. Tho incroase ln these branches5illion andillion.

Total And Annual Increases In The Number of Workors

A::cTKLiployoes In The-USSH lybU-bK an-TT^m

.1/

(End of YeariV in Millions)

Year

(Plan)

0 Plan goal is average annual employment.

2/ roducer cooperative artol members were' Jrst tlB0orkors

-7 Ih;%Js anannual goal omparable year-

ould

4/ This is an average annual incremont In the last two years of the 5th Five Year Plan, the annual increments for avorage annual and year-end employment were the same.

AGRICULTURE

mmiiJSSn;nt announcement points6 as tho best agri-

cilttOVen though agriculturehief deterrent to future long-run economic growth. Last year's

achievements are attributable to the new lands program,olivery Prices--all "Knrusnchevian" PriiaariJyof extensive use of^tSUgrain hardest

d' increased byercent5 and state acquisitionscent; of corn cultivation in established regions stopped up the number of cattle and meat and especially milk production and procurements. Output of industrial crops, including cotton, continued to increase. Potatoes wero up out vegetables down.

3 ,or stat0 requisitions reinforced thehuin 5ttrnand farmer incomos: ollective farm incomo

XoA armors doubled25 and probably rose5dvancos larger than those of workers and

'CONFIDENTIAL

employees. As an offset to Income levels, however, capital goods for farms and consumer goods for farmers may not have boon supplied in suxilclent volume to achieve maximum incentive effects.

While the new policies have incorporated radical changes in land use, delivery price rates, and investment, they all have the conservative aim of refurbishing the collective farm system; and the free marketasic source of foodstuffs supply to the urban population. Although private livestock rose againhe share of free market sales in farmers' incomes hasand for the first time,as probably oxceeded by wage payments from collective farms. Stato farms' achievements in virgin lands encourage tho prospect that collective farms thero may be converted to state farms, butransformation in established rogions seems out of sight.

Output And Deliveries Of Grain And Milk

* Years

(millions or metric tons)

GRAIN

(Plan)

(Plan)

CONSUMER WELFARE

The report claims substantial improvements with, tho exception of housing, in the material well-being of individuals of all groups in Soviet society, The average Soviet citizen probably6 in his material well-being exceeding those notod in tho fairly stagnant situation Generally, the urban dweller has been the rocipient of "fringe" benefits while increases in Income have gone to the rural population. Difficult as It is to rank relative gains, rural improvementsxceeded that of the urban dweller,

The report stresses these "fringe" benefits primarily directed to urban industrial workersncroased pensions, expansion of free educational opportunities, improved conditions and hours of

- 7

work. Average wages of workers and employees (mostlyercent; peasant Income "ln money and ln kind (In comparable prices)" Increased, on the other hand, byercent. Prices ln state and cooperative trade seems to have romained steadyith tho claimed drop ofercent Inmarket prices probably resulting from the year's bumper harvests.

Avallabllitlos of consumer goods and servlcos seom to have Improvedlightly greater rate than Output of industrial consumors goods increasedercent, slightly moro thanho Increase of rotall salos in tho state and cooperative networksercont was better than double that of the preceding year, but still lagged behind other major growth indexes of the Soviet oconomy. Food availabilities seem to have been relatlvoly good--as Indicated by tho harvest; clothing availabilities (with the exception of cotton cloth shortfalls connectedhort cotton cropeems to have been fair; and other non-food items seem to have shown generally high increases but probably less than in the recent past.

TRANSPORT

Transportation of freight in tho USSR does not appear tothe leadershipajor economic problem for tho present five-year plan period. The report mentions continuedwith incroases in shipment of timber, but it fails to mention coal and oil shipping shortcomings that had been cited6 at the Party Congress.

USSR aggregate freight turnover expanded6ate slightly above that for total industrial Output, but at anslightly below that Railways, providing the bulk of freight transport,ate of increaso which also slightly exceoded growth of total industrial production. The ocean fleet and auto transport oxpanded more rapidly,mall amount their share of total freight turnover. But the river fleet increase was about half thatarked lag.

If sustained throughout the present five-year plan period, these growth rates imply fulfillment of0 overall transport targets. River transport wouldarge shortfall, however. And, despite the high growth rato of auto transport, it must Increase even faster if it is to meet its extremely0 goal.

PROBLEMS AND PROSPECTS

-teNFiBENTfrti

The rosults6 plan fulfillment show continuation of the rapid tempo of growth. At the same time, an Incipient threat to0 goals is indicated bocauso of difficulties in certain koy basic matorlals industrlos, capital construction, apparont less than adequate growth of labor productivity, and risingfor more housing. At year's end tho SovletB had moved to solve theso problems by putting porvukhiu's special comaittoe at tho hoad of the Short Range Planning Commission and giving it extensive operational responsibilities to rephase the industrial capital investment program and to improve the performance in housing construction. Furthermore, tho committee also has

(OFFICIAL-USE ONLY When Tables Are Renoved)

respODslbilltloB for executing the new wage reforms. Much will depend upon the success of Pervukhin's committee in adjusting the investment program, finding ways to Increase housing in face of shortages of building materials, and maintaining tight control over the use of scarce energy and raetnls. There is no doubtarge potential for increasing efficiency still exists throughout most of the economy. On the other hand, fortuitous woathor conditions may well have6 the peak agricultural year of tho Slxtb Flve-Yoar Plan. Growing investment commitments to agriculture and higher delivery prices mean that agriculturo willising cost to the state, offering competing priorities with other sections of the economy. Furthermore, the workers' reaction to the improvod supply of foodstuffs, tho new socialand wago moasuros, and whatever housing that may be provided, is problematical, but will be an Important factor In maintaining tho growth tempo.

Research and Reports

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