SKGIJ
INTELLIGENCE MEMORANDUM
EVALUATION OF THE SOVIET
FIFTH FIVE-YEAR PLAN
ORMflTION AFFKC7IHG THE ITKD STATES WTrHlN TEE IAW, TITLEUSC, SKCS. ION OH RWBfATIOH OF [nwUTHOItiaBD PERSON IS
'CIA/RR82
CENTRAL INTELLIGENCE AGENCY Office of Research and Reports
PRKLIMINARY EVALUATION OF THE SOVIET FIFTH FIVE YEAR PLAN
II.
III.
rv.
v.
VI.
of Soviot Planning Usefulness and Reliability of Plnn Data Tbe Data
Economic Aggregates in the ?ivo Ioar Plan Growth Potential of the USSR Economy
Implications for Soviet Economic Capabilities for War
-
I. Direction of Soviot Planning.
The Fifth Five Yoor Plan, covering the period from the beginning1 to the endas announced in Moscow on Most plans are announcedear after their beginning) in this case it may have boon delayed because of the iccaense statistical and planning work required (especially since this Plan has boon integrated with the Satelliter in order to use the Plan as an additional propaganda device for the curront Chinese negotiations and the Party Congress to convene shortly.
It has been obvious for seete time that tho USSR has been operatingev plan, but until now there has been no Indication of the basic nature and direction of the planned economic effort It is the fifth such plan. Tho first,8olloving the capitalistic Nov Economic Policy, had its main emphasis on electrification of the economy. The sooond plan laid stress on transportation and heavy industry, while tho interrupted third plan vas to consolidate the gains of the first two. The war madeevision of tho third plan, and only Interim planning waa in effect until the iosuanoe of the fourth plan,6 Restoration of the war damaged economy was the keynote of the fourth plan.
The Fifthar Plan appears to be tho first balanced and general plan. It sixessea over-all development and expansion. It Is evidence that tho USSR intends to enlarge the industrial base of their economy. The output of consumer goods is to advance slightly, but theshare of total resources devoted to tbe consuming sector.vlll probably not increase. While the military sector is not specifically mentioned, it does not appear that there will be any change In the proportion of total resources devoted to military production. Tho rapid ratt.ii ol growth for such items as steel, copper, aluminum, electric power, petroleum, and machine building demonstrate that the purpose of this Plan is to develop natural resources, to build plants and equipment, and in goneral to workosition whore tho Bloc can challenge the industrial night of tho non-Bloc world, olther by peaceful competition or military aggression.
II. The Usefulness and Reliability of Plan Figures in Estimating Economic Activity.
Official Soviet pronouncements on planned goals and their degroo of achioveoent are an essential oloment in the Intelligence picture of the Soviet economy. Other sources of Intelligence provide only scattered information, generally of questionable reliability, on the same range of subject matter. Hast wartime and postwar statistics to be found in this paper have been derived either from official Soviet announcements of percentage increases or from adjustments, usually downward, of such announcements. Since the second plan, the USSR has published fewer and fowor absolute date on production. In tho fifth plan there aro oo absoluto dets. In the academic and intelligence communities, moot data for reoent years have been derived from absolute data0 (availoblo ln detail) and subsoquontly announced percentage lncroaseo. Intelligence rosoarcb on the Soviet oconomy has not advanced sufficiently toeneral "consistency check" to determine, for examplo, whether estimates for some industries aro unreasonably high when comparod to other industries. Thus we must still rely altogether too heavily upon official pronouncements.
Pronouncements of the Central Statistical Administration on plans and achievements cay be fiction, in whole or in part. It would be easy for top planners toouble set offor controlling tbe economy, tho other for propaganda mill. The USSR isast expanse, and economic activity there is so varied, that few within theat high administrative andorrect insight into over-all conditions in an industry or an aroa. Vith the convenlonceouble-acoouating device at tholr disposal, the planners might well feel it to thoir advantage on the cold war fronts to misstate their economic accomplishments and plans. The reason for believing tliut this is probably not tho case rests largely on tho belief that, givon their world-wide objects and their tight control over the economy, the derived statistics for particularthe announced Indexes of agregates, such as gross industrial production and laboreminently reasonable. Comparison. achievoaents impresses one that the slopes of Soviet production are not extraordinarily steep. Our conclusion is that tho published Plan is substantially accurate. The analysis In this paper is accordingly based upon the prenises that thetatistics aro approximations to reality and that wo have notpaper economy."
Approximatelyercent of total Soviet economic activityovered by the Uxt of the official statement on the Fifth plan. The principal areas omitted are the military production and operationalducationertain industrial and military construction activitiesctivities of the ferrous metal, chemical, and machinery industriesnd lumberingsing the statistics which were announced, the charts, tables, and map which follow depict objectives of tbe Plan and contain statistical analyses and comparisons with other years and with the United States.
Iffblehows the increases, according to Plan, in the broad economic aggregates, such as gross national product and industrial production.
hows datand5 goals, along with percentage changes. data. In this table approxiaotoly
ercent of total Soviet economic activity is reported. In addition to the sector ignored In tho official pronouncoment, the folloving activities aro not included boouaae of the difficulty of obtaining proper units of absolute measurement! health servicesther construction activitiesonsumer goods other than textiles (A.etail tradeundry financial and communal serviceaachinery productsnd vood productsercent).
rranges selected items of the Plan by order of.
Tho charts. production with Soviet productionate,ange of estimates for both countries. Tho coverage of the economy in the charts is less comprehensive than in Table A. Onlyercent of total Soviet economic activities are depicted heroin. The newly eliminated areas aro grain, flax, andextilos and footyoornd machine tools, turbinos, oaustic soda, and soda asiiercent).
Tho proportions of total econoclc activity assigned to each sector are based on the relationships of the wage bills of the respective soctors relativo to the total wage bill for the entire economy, as shown in1 Plan. Shifts In the relative share of the various sectors1 would not significantly alter tho indicated proportions.
Tho map, drswn wholly froa the USSR published statement of the Plan and bonce unclassified, shows specific installations, such as river and rail developments, electric stations, and othereographically indenUfled in tbe Plan.
TAEIi A
of the Rate of Growth of Selected Economic Aggregates in the Fifth Pive-Year Plan
lan:
*as %
0 8 5 0
National Income (billions7 rubles) Gross Industrial Output (billions7 rubles) Producers' goods (billions7 rubles) Consumers' goods (billions7 rubles) Retail Trade
(billions of current rubles; Productivity of Labor (percent) Money Wages
(billions of current rubles) Industrial Workers (percent)
Table B
USSR Production and Plan Objectives
0 ml)
0 mt)
Beets 0 nrt)
(COO mt)
0 mt)
t)
0 units)
0 units)
and0 animals)
0 mt)
0 nt)
0 mt)
0 mt)
fertilisers
mt>
0 mt)
0 mt)
0 mt)
0 a
0
0 pr)
0 mt)
soda 0 mt)
Ash (calcined soda)
mt)
-
oil 0 mt)
Rubber 0 n
0 mt)
0 unita)
0 rat)
Iron 0 mt)
0 rat)
Steel 0 b
0 nt)
0 ret)
0 mt)
(COO mt)
cont'd)
DSSR Production ond Plan Objectives
.
0 mt)
0 mt)
and )
Turbines )
0 units)
Tools 0 units)
*
(units)
Power
kwh)
Freight
T/km)
1
Transport
T/km)
Transport
T/km)
Transport
T/km)
0 GRT)
USSR
'Tat
able C
Percentage Increases in USSR Fifth Five Tear Plan (Arranged by order of magnitude)
Increase over lO'aO
Automobiles Hovie screens Peat
Railway transport
Coal
Potatoes
Flax
Paper
Coking
Nickel
Woolen fabrlos Leather footwear Ocean transport Wheat Cotton
Timber haulage Flab
Cotton goods Steel
Rolled steel Sugar beet roots Butter
River transport Pig iron Vegetable oil Sugar
Caustic soda Electric power heavy sheet steel Tin
Motor transport Synthetic rubber Calcined aoda Petroleum
Metallurgical equipment Mineral fertilisers Copper Meat
3 27
O U3
h0-h$
U5
u6
50
5*3
5u
55
5
*
2 6k
2
68
00
82
8h
B5 85
KB
90
92
Percentage Increases in USSR Fifth Five Year Plan (Arranged by order of magnitude)
Air transport Machine building Rolling eovipnent Precision machine tools Building materials Canned goods
Light soction steel and wire Cement
Steam turbineo
Chemical equipment
Bricks
Zinc
Drugs andAluminum
Large machine tools River passenger boats .Slate
, Steam boilors Lead
Operation and control instruments Freighters and tankers Furniture
Rustless sheet steel
Oil equipment
Fishing vessels
Polished glass
Pipelines
Hydro turbines
Heavy forcings and presses
Percentage Increase0
no
120
1
170
38
C0
IV. Economicw i" the Five tear Plan
The Plan text contains selected data on economic aggregates. The information is not complete enough toystematic analysis ofbut does provide enough to make some preliminary observations. Appropriate statistics are found in Table A.
It is estimated that1 USSR gross national product waa dlotributed as follows: percent; militarypercent;percent; and governmentpercent. Although the Plan text does not present aggregates in those terms, it can be deduced from statistics on planned increases in the output of consumers' and producers' goods that the relative weights of those two magnitudes will differ little frost0 level, as seen in the following tabulation.
5 0 ubles)
Producers'
Consumers'
Gross national income is to rise byercent, while gross Industrial output (consumption plus investment) is to rise byercent. If problems of definition and measurement are ignored, it will mean that the other components of gross national product will rise by less thanercent. Therefore, it may be concluded that the proportion of resources devoted to military snd sdmlnistrative purposes may fall and most cortninly will not increase. This conclusion is consistent with the general proposition that the film of tho Plan Is long-term expansion of economic power rather than ixmediate expansion of military operational facilities.
Other official figures lend further support to the conclusion that no increased emphasis will be devoted to the consumption sector. Theercent addition to the money wage bill will be exactly offset5 percent rise in the nonagrlcultural labor force. Any increase in tho real income of labor will therefore have to come in the form of reduced retail prices made possible by Increased labor productivity. Tbe Plan proposes an increase ofercent In roe] wages through the price reduction technique, to be made possible by an Increase ofercent in labor productivity. ailure to achieve this high produetivity goal would severely limit tho chancesignificant Increase in consumer real irtcotte.
It uiil be observed inhat percentage increasea in production of many consumer goods items aro less than the over-allorcont for the grouphole. This inconsistency can be explained by the weighting system the Russians probably employ in constructing their consumer goods production index. The items which bulk largest In the consumers' budget ahould be weighted most
heavily ln thc Index. Inhe percentage increase Tor wheatnd cotton Those four itensargo share of consumer goods production. It is the large increases ln these four items that account for the see-singly high rise in thepercentage.
It is interostlng to note that the relatlvo accretion to the labor force is less than In forcer plan periods. Theercent rise in the labor force la not much greater than tbe general population increase. Evidently it ia no longer possible to add to tbe Industrial labor force by drawing upon tho agricultural population. The high goals set for farn products rule against further reduction In the rural working population.
V. Growth Potential of the USSR Economy
Thia Plan callsremendous upsurge In natural resource development. In the processing of basic materials, and In machinery output. Properly interpreted, the USSR contemplates that5 it will have an economy half again the size of0 economy. In general, the economic system of the USSR is capable of this sort of grovth. To do so requires that consumption levels be held low; expansion in the consumers' goods sector can proceed at no greater pace than general expansion. In addition, the building of military end items cannot be allowed to encroach on expansion in other areas; the relative share of the military sector must remain about tbeurge effort must continue to go intoloughing back into the economyubstantial portion of their rosources. Under these conditions tho USSR can in general attain5 goals they have set for themselves.
While In the aggregate the Plan seems capable of achievement, the details present a'less optimistic picture for tho USSR. In some particular items it is dubious in the extreme that the specified goals can be met. In other sactors, while thc Plan is achievable, it would be straining the economic and technological system to the fullest and it is doubtful that the USSR is prepared to commit the rosources necessary to attain the particular aim.
Agriculture has long boon lagging in the Soviet economy. In keeping vith the balanced progress which is the theme of this Plan, planned increases for many agricultural products are beyond the capabilities of the USSR. This is especially true of grains, meat, and potatoes. Othor items, such as hogs, cattle, sheep and goats, fish catch, and cotton, are possible of achievement, but for some the Plan represents the outside limits.
In the onergy sectors of thepetroleum, and electricis wide divergence in their ability of meeting tho Plan. Tho coal goal seems quite modest and the USSR is fully capable of meeting and exceeding it. The goal for electric power is also easily achievable and will probably be overfulfilLed. The situation in petroleum is fart callsn million netric tonshereas Stalin previously claimed that there would beillion metric tons Thisubstantial oil boom. Thc general concensus is that, while it is technologically possible, tho USSR cannot In fact achieve the Plan in this respect. Questionable statistical practices, such as including natural gas with their petroleus5 but notay account for some or all of the discrepancy in statements* Jn any case, the Plan for petroleum is much too high.
tho iron Bnd 3teo1 Inonatry seerao realistic and within
the capability of the USSR. Pig iron, raw ateel, und rolled steel plana arc ln the proper balance. The high goal for nickel, in which full achievement is doubtful, indicates that there will be an emphasis on structural steel.
Construction materials, such as brick, cement, and lumber all have very high goals. They are capable of being achieved, but only by using plant facilities to the fullost extent ond building new ones. Tho goal of almostrillion bricks mayubstitution of brick for structural steel end lumber ln construction. The planned increases for nickel, used ln structural steal, in bricks, and in lumber lends credence to tho belief that the emphasis of this Plan is on plant and plant facilities.
On the basis of ORR estimates covering the last few years, tho planned expansion In nonferrous metals may be ovcrambitlous. The planned increases in lead and sine production, for Jnstanco, are considerably out of line with trends91 as estimated by ORR. They do not appear so unrealistic, however, if compared with estimated trends5 It is not possible, therefore, toirmon the feasibility of plan fulfilmenthorough re-examinatloo of tho soundness of estimates for the last few years.
mll part of tho chemical industry ia covered in terms of specific items. But froo what is given in the Planeneral picture of rapid building Is In prospect In the industry. The mineral fertilizer industry, to which sulphuric acid, ammonlu, and nitrio acid are closely associated,igh planned goal. It seems only barely possible that the goals can bo reached in view of tho difficulties the USSR has had In recent years in building chemical plants. Caustio soda andm pouslblo, as does eoke-cheraic.*-
The transportation sectorhole can be sttained. In rail transport, where tha USSR concentrates its transoortation effort, the goal can be realized. Truck transportation is also possible of achievement.
Mater transportation, both river and oceenlc, are somewhat doubtful.
and the planned increases are the outside limits.
For the large category of industrial products the Plan itself is noticeably vague and spotty. oubling of machine building Is plannedeu specific items aro mentioned. Without Knowing more about tho composition of theae categories it lo not nossltlo Lo ixidu- the capability of the USSR lo meet the tUtmd goals. ercent increase in chemical equipment seems doubtful, as do the high goals fcr steam and hydro turbines. The machine tool and metal cutting machinery cateRories aro so fuzzy that all that can be said is that substantiale posaible in the rather broad category of machine tools, but whether the goals can be reached cannot be determined.
Considering the emphasis on basic materials, such as metals, construction materials, petroleum, and electric power, it seems reasonable to expect substantial expansion in machinery and other industrial products. But whether specific Plan goals can be net cannot be assessed.
The Plan is an obvious indication that the military power in being of the USSR will increase5 and that its economic capacity forar will be larger. These accretions do not necessarily mean, however, that Soviet bower will improve relative to that of the West. Interpretations of Soviet economic potential for war cannot be made without determining in detail military produc tion in tho entire Bloc, and then relating this to the Bloc's military ability to conduct global warfare. In order to make an estimate of thisoaBlet* war game study is mandatory.
Lackingtudy, oomparisoh of economic activity between the USSR andr between the Bloc and the NATO states can be dangerously misleading. In the first place there is the obvious consideration that the Blocuch greater portion of its total production for military purposes. But even taking this difference into account, levels of production are only ono indicator in assessing relative power potentials. yriad of non-economicpsychological, geographic and military, amonginto power assessments.
Yot it is equally misleading to Ignore economic activityactor in the assessment. In economic activity Is found one of the greatest disparities between the Bloc and the NATO states. This disparity isajor, if not the primary, element in the West's superior power potential.
omparison of the USSR withven though it ignores the sotellito states and the states allied and associated withs notout of order. This is because the vast majority of Bloc production comes from thc USSR, and because the majority of Western production comes from.
In comparing the rates of growth in selected segments of. and Soviet economies there isimited validity in assuming that these comparisons pointhange in the power potential of the Bloc relative to. with its allied
and associated states.
If the Plan is substantially achieved, und there is every reason to believe that it will be, the economic capabilities of the USSR5 will bo much greoto. than they are today, leaving aside the problems of inventories of militaryand production of military end items, both of which are most important in the short run. it is the opinion of thin office that the preponderant economic superiority. over the USSR will probably bo reduced, perhaps to aextent. Whereas at the beginning of the Plan the economy of the USSR was not sufficiently developed to withstand tho destructionrotracted general war, it will beuch better position to do so Production in the USSR will remain substantially below that ofut the ability of the USSR to divert proportionately more to the military sector mitigates this disability.
From an economic viewpoint, the USSR must be regarded as an increasinglyfoe with ati increasing potential for massive war prcductionrelude to large scale modern war on many frontsong period of time.
Original document.
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