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MEMORANDUM POR THE RECORD SUBJECT: US-USSR GNP Comparisons
The attached memorandum and Table were forwarded to. Badgett, USAF Academy, Colorado, per his request.
Attachments: as stated
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MEMORANDUM FOR THE RECORD
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SUBJECT: US-USSR GNP Comparisons
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burden of defense cannot be measured fromcomparisons in dollars. Defense burden is correctlycalculating the defense share of GNP when both defenseare stated in domestic prices. In the USSR, defensebe defined within tho context of Soviet GNP in rublecalculationreater burden for the USSR thanor the USSR vsor the US.
dollar comparisons of GNP and defensegive accurate indications of defense burdon. Thebehind tho comparisons makes this impossible.
estimates of Soviet defense spending inthe cost of producing the Sovietin the US based on US resourceand transformation rates. Those,have no relevance for the USSR.
dollar figure that *hows Soviet GNP to beUS GNP is the geomotric average of rubleGNP comparisons. Ruble and dollaryield different but equally validdollar comparipon measures the relativethe two countries to produco the Soviet mixruble comparisons measure relativeproduce US output. The geometric avorago ismeasure of relative ability to produceof output that lies botween the actual
and dollar comparisons yield verybecause tho patterns of output and prices varythe US and the USSR. Dollar prices placeon output of investment and defense in which theruble prices place greater weight on consumer
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goods in which the US has an absolute and relative advantage. Underlying tho comparisons is the assumption that each country could switch to the other's mix of output with no change in unit costs or prices. The dollar comparison assumes that the US could shift to the Soviet output mix with no change in the dollar value of GNP. Ruble comparisons assume the Soviets could shift to US output patterns with no change in ruble GNP. Because each country is better equipped to produce its own output mix, dollar comparisons favor the USSR while rublefavor the US. Soviet GNP is larger, relative to US GN? if the comparison is made in dollars. ingle, dollar figure for Soviet GNP is required we use the geometric average of ruble and dollar comparisons. In theory it provides aless biased than either of the comparisons in national prices.
Attachment: as stated
liMIUAXSIFItO
UNCLASSIFIED
US and USSR: Comparisons of GNP
f us
as % of US
S billion
Geometric6 USSR as % of US
3
HftASSlFIEB
Original document.
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