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Monthly Review (u)
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the USSR Monthly Review is published by the office of soviel analysis. comments and queries regarding the articles arc welcome. they may be directed io ihc authors, whose names arc listed in the table of contents, (u)
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poor performance of ihe economy during Ibe tflyrs laitcr years of the Brezhnev regime has driven home Io (he Andropov Politburo (hat there are relatively few opportunities for quick fixes and ihai iheproblems of Ihe current decade may spill over inloseehus, its policy decisions may be more forward looking. Andropov will be acutely aware thai severe disruption of the economic system by ihe implementation of hasty, ill-conceived policies mightuick route to bolh economic and political disaster. The Soviets will continue to be dependent on the West for significant purchases of agricullural products and machinery and equipment for both agriculture and indusiry,view of iheirexperience in commercial dealings with ihe United Stales- (hey probably will respond skeptically to US initiatives, pj
Changes in Decisionmaking Process The new leadership probably will continue to favor bureaucratic centralism rather than move voluntarily toward fundamental systemic change. Theseof the stringent economic situation and iheir ownlikely to rely more on tightened discipline and control io effect economic policies of long standing (han on coaxing desired behavior through increased incentives Andropov's long tenure in the KGB has given him experience in using administrative measures to modify behavior. Moreover, the Soviet people, faced wiih unsettling economic and social problems, seem ready toeader who would demand greater
This trend, however, would not ruleix of liberal and authoritarian measures. Greateron ihe private sector, for example,istinct possibility that could be classified as liberal, while harsher penalties for labor absenteeism andthough authoritarian in nature, need noteturn lo Stalinism.!
Changes in Policy
The new leaders will surely bring changes in economic policy. Because ihey have laid particular stress on continuity, and because it may take some time totrong consensus, new policy lines may not appear. when the Five-Year Planas been drafted. Some indications of chang are likely to be discernible earlier, however, as discus sion and debate about policies for ihensues and annual plans45 are
The hardest policy decision for the Andropovwill be ho* to allocate resources among the major claimants. Maintaining historical growth In defense spending would squeeze investment andfurther. Keeping investment growth at cur rent rates as well might result in an absolute decline to consumption^
The Military- Foi the past several years we have sec little or no growth in military hardware procuremen More resources are needed to break economic bottle necks,lowdown (or even zero growth) in military procurementew years would have littl negative impact on forces already in the field;of these forces could still proceed. We believe ihe groundwork forourse may have already been laid in Brezhnev's speech to top militat officers onn any event, this court will be required if the Andropov Politburomprove economic performance substantially h
trong candidate to receive morefunds is ihe machine-buildingof the need to modernize Soviet industry and because of constraints on importing foreignand technology. Modernizing machine building would also helpemporary slowdown in defense hardware procurement, as suchcould ultimately enhance military hardware pre duclion. The new leadership, wiih its longer time horizon, might launch such an cfl'on.b
Outlook for the Soviet Economy in
economic growth will continue lo decline Ins average annual rales of increase in labor and capital decline and productivity gains fall short of plans. We expect average annual CNP growth to fallercent per year in
The labor force will grow more slowly than it didan average annual raleercent
6i comparedpercent. ii)
Growth in the productivity of Soviet plant and equipment, which has fallen substantiallyill continue to drop as the cost of exploiting natural resources rises and Moscow is forced to spend more on infrastructure
Continued stagnation tn the production of key industrial materials- -particularlygrtmf* in new machinery, the key source for introducing new technology
Energy production will grow more slowly andmore expensive, whether or not oil production falls.
With continued growth In domestic energy require RMHU, Moscow willonflict betweenoil exports and meeting domestic needs.
i Agriculture will remain the most unstable sectorthe Soviet economy, with performance in anydependent on weather condilions^m
Slower growth of production will mean slowerin the availability of goods and services to be divided among competingfor future growtkhe consumer, and defense:
Rapid growth In defense spending can beonly al ihe expense of investment growth.
Slower expansion of investment will beby Ihe increasing demand for investment goods in the energy, transportation, metallurgy, andsectors.
An increased share of Investment in heavylogelher with continued large allocations to agriculture, will depress the expansion of housing and other consumer goods and services^
Making up production shortfalls through imports will become more expensive as the need for imports increases and Moscow's ability to pay 'hard currency earnings) declines
The Soviet need foe Imports of Western grain and other agricultural commodities will remain high in, as will requirements for Westernand technology.
We expect real export earnings to decline between now0 as sales of natural gas fail to offset ihe drop in oil earnings, and opportunities toexports of oilier commodities remain limited by their low marketability and lightness insupplies.
The availability uf Western credits will be crucial for Moscow to maintain or increase its imports from Iheighter credit market would complicate Soviet economic problems and make resource allocation decisions more painful. jj
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A leadership prone lo aoihoiilarian solutions is likely lo be more pragmatic in iupolicy and may place more ilrets on tying wages and perquisites more closely lo production results.
Retail prices may also be raised on all but essential goods and services, and an expansion of privately operated consumer services may be in the i j
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The Politburo's predilection for administra-tivc measures and bureaucratic centralism would severely limit the extent of future economic reform. The difficult economic situation argues againstmeasures like ibose launched in Easiernhave never been tested in ihe USSR. Some movementegionally organizedmight be thought more suitable to today'sexample, exploitation of energy and raw materials in Siberia. H
Agriculture. Moscow will continue lo support ihe farm sector bul might decide to favor ihe industries that support agriculture and those that process its output. The Food Program already does this io some extent, but an actual cut of investment inside ihe farm gale wouldtronger signal of the new leaders' dissatisfaction wiih ihc returns from agricultural invesii
Labor. In addition to instilling tighter discipline, the Andropov leadership is likely to focus on automating manual labor (consistent with more investment in machinery) and developing social and culturalin labor-deficit regions. The latter would provide some inducement for workers to emigrate from labor-surplus areas and would reinforce adifferentiated pronatalisl policy favoring Ihe labor-deficit iireasH
East-Wesi Trade. With economic problems pressing from every quarter, ihe leadership mightthough perhaps notopportunity toeconomic lies with ihe West in general and withUnited Stales in particular, especially if decisions are taken to maintain slow growth in militarystep up investment in machinery, and reduce investment dedicated Lo ibe farms. Under theseMoscow might find it advantageous to pressconomic Lies lhat provide the USSR with technology and goods for both civilian and military purposesrms control arrangements lhat limit Western advances in military technology which they would find difficult and cosily to counier. pj
Impact of Changes. These changes in approach and policies will notanacea for tbe Soviet economy's ills. Nevertheless, Ihey could bring marginalin key areas and allow the leadership to
continue io muddle thiough even in the face of economic conditions probably worse than they had expected. Of primary importance to the Politburo, these policies would not require the surrender of power and would continue to allow il ibe freedom to impose its will on the smallest economic orunit. In this way, the leadership could feel assured of its ability io handle such problems as public unrest, external economic or military threats, or internal disasiers that would require an cmcrgcnc redistribution of rcsour
Economic Relations With the United States
Notwiihstanding the importance of expandedtics with the United States, the Sovietin commercial relations with Washington has been disappointing to Moscow since Ihe, and it would probablytrong US initiative jui lo get the attention of the Soviet leaders.ffer to renew close economic lies with the USSR might be welcome, it would probably be greeted skeptically by the Soviet leadership asactical"further retreat by Washington (following the grain and pipeline decisions) brought about by US-West European economic competition and pressures from US business circles. Needing to consolidate his power, Andropov couldif hunilaterally to such an initiative, bi would have to moveeadership consensu) strongly influenced by the views of Foreign Minister Cromyko and Defense Minister Ustinov, who would urge caution. Thus the Soviets might:
Accept part of the offereans of coping with particularly acute bottlenecks, especially in techno ogy and food supplies.
Seek to avoid long-term economic dependencies on ihe United Stales.
Exploit any new atmosphere of mutual accommodi tioneans of reinforcing support in Ihe Unite States and Western Europe for cutbacks inending and arms control measures favorable to Soviet interests]
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The United States, foi example, could again become an important source of Sovici purchases ofproducts and machinery and equipment for both agriculture and industry. The need it there, if the "price" (including sanctity of contract) is right. Soviet at^ictilture could benefit substantially from USin livestock feed production. fertilizerand animal breeding, and the United State is still Moscow's beat long-term bet for grain importsarge scale. |
The USSR faces increasing dependence on the West in developing and processing its oil and gas resources in. The Untied Slates ia the preferred supplier of most types of oil and gas equipment because it is by far the largest producer, with the most experience, the best support network, and often tbe best technology. In someexample, large-capacity downholeUnited Statesorld monopoly (albeit one that could be brokenew years by entry of other Westernnd the moat critical needs of the Soviet oil industry are for just such equipment. |
Because the prospecu for Soviet hard currencyin there far from bright. Western credits will have to cover an increasing proportion of Soviet imports from the West. An increase in ihe availability of US Government backed credit could look very attractive to Ihe new leader* in
would refute to make any significant politicalin return- which Andropov probably could not deliver even if he desired. If this process permitted the Soviets to acquire irsore technology on acceptable terms from the United Stales, they would donot at the expense of established ties with Western Europe and Japan, or of their own long-termindependence.^
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balance we would expect the Soviets to give any US initiative low-key treatment, publicly catting doubt on US motives, bul at ihe tame lime seeking to engage tbe administrationialogue aboutS offer to returnbusiness at usual" basis would probably not result in any turge in orders for L'S companies beyond tbe sectors in which Ibe United States is already an important supplier. Moscow is at least as likely to use Ibe opportunity createdS offer io put commercial pressure on ihe Westand Japanese and exacerbate existing tensions in the Alliance.inimum. Moscow would press for US Government guarantees regarding fulfillment of contracts, and ii might seek repeal of the Jackson-Vanik and Stevenson amendments. In either case, it
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