RUBLES FOR RESEARCH: TRENDS IN SOVIET R&D EXPENDITURES (SR IR 67-3)

Created: 11/1/1967

OCR scan of the original document, errors are possible

DIRECTORATE OF INTELLIGENCE

Intelligence Report

Rubles for Research: Trends inxpenditures

copy No. ovember 7

Contents

Page

I. Introduction

IX. Soviet Expenditures for

of

Total Expenditures

Funds for Military

and

Allocation for

III. Research and Development and Soviet

National Policy

Appendix

I. Concepts, Definitions, and

Concept? and

Data Compared with

US

II. Interpolation and Extrapolation of

Soviet

Expenditures for

for Military RDTE&S .

The All-Union

other

III. Source References

Estimated Expenditures for Research

and Development, <>

Funds for Research and Development,

24

Federal Expenditures for Research

and Development, Fiscal . . 24

Comparison of tho Two NSF Series on

Federally Sponsored Research and

Announced Expenditures for

Science, 26

Total Expenditures for Research

and Development, by Source of Funds,

31

Expenditures for Military RDTESS,

by Source of Funds, 32

Illustrations

Figure 1. US and USSR: Comparison offor Research and 2

Figure 2. USSR: Sources of Funds for

Science

Figure 3. USSR: Growth of Estimatedfor Research andby Source of Funds,

12

Figure 4. USSR: Growth of Estimated for Military RDTEiS, of Funds, 13

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CENTRAL INTELLIGENCE AGENCY Directorate of Intelligence November7

INTELLIGENCE REPORT

Rubles for Research: Trends inxpenditures

Summary

Throughout the postwar period Soviet science has been nurtured under conditions which have led to increasing claims against scarce resources. The combined effects of intense cold warthe pre-eminence of science in Marxist thought, expansion of technological horizons, and generally favorable rates of economic growth have stimulated rapid increases in scientific research and development and space ) programs. While many of these conditions still prevail, there are signsanagers may be called upon to provide greater justification for future programs in economic terms. Disagreements between military and political loadersriorities are likely to increase.

Financial outlays, whichroad measure of trends in resources devoted to, can bc estimated with fair confider.ee through analysis of Soviet budgetary data. Total expenditures for all civilian andnd the soace program rose from about illion {in equivalent US terms) 0 to more thanillion in7 (see

Note - This report uas produced solely by CIA. It was prepared by the Office of Strategic Research and coordinated with the Office of economic Research, the Office of Scientific Intelligence, and the Persian Missile and Space Analysis Center.

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Most of this increase occurred in the military and

inCludin9 civilian (militaryhere expenditures rose from about Si billion0 toillion

00 the growth rate and level of expenditures for Soviet militaryere roughly the same as those for equipping andeither tho strategic offensive or strategic defensive forces. argelyesult ot the burgeoning space program, expenditures for military RDTEsS have grownubstantially greater rate than those for the strategic forces, andadevel about the same as that of the combined expenditures for equipping and operating both of the strategic forces.

Growth in Soviet outlays forave

nUS activity,

h devoted lcss total resourceshan has the US (see in both

countries scientific efforts have received steadily increasing shares of available resources, 5 for example, expenditures for militaryccounted forercent of total Sovietand space expenditures, and5 for someercent. Comparable figures for the USise ercent toercent. Rates of growth

lZT in rCCent yea" in both cowries, partially at loast, because investment in facilities

in some of the larger programs has passedmost expensive

in the growth rate has not

J;;; sharp inussR in us, it apPears

that now economizing measures now are beingby Soviet leaders. There is increasing

tK"eappetite whiCh during thes waswith unqualifiedis beingto more careful scrutiny. By aboutnew concern for the economic use of theruble had become fully documented. WeIVS Naders and has come

the 2SiVi?is needed in

the use of the scientific and technologicalof the

The calls for more effective economic controlave been influenced to some extent by the very complexity ofrogram which has attained the present size of theffort. At the same time, however, pressures on scarceresources generated by currently expanding strategic military programs and programs to stimulate economic growth have probably raised otherof at least equal importance. There is no indication that plans to develop more effective managementudgment that potential military or economic gains from technology are diminishing.

Soviet budgets are published only on an annual basis and what little direct evidence of future funding trends exists is limited to generalized statements by scientific planners and other Soviet officials. Such statements often represent pleas of special interest groups rather than government policy. Under these circumstances projections ofxpenditures seem oarticularlyimple extrapolation of the general trend wouldate of someear during the next few years, and there have been protagonists of even higher rates. On the other hand, expenditures grew by onlyercent The general revision of Soviet wholesale prices that took place7 will be reflectedxpenditures. Preliminary analysis indicates that the not effect will be to increase moderately the costnouts.ercent increase in expenditures is plannedhe growth in real terms is probably somewhat less. It seems likely that actual growth will fall within the rangeoear over the next few years.

Funds from the Soviet State Budget re cnanneled through several accounts. The major single source is the allocation for science in the ^ocial-Cultural category. withinis total ail-union expenditures for science" * ? Con"ain raost of the financialfor military RDTL'&s. Additional militaryunds appear to originate in the budget

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category called Financing the National Economy. Tho Defense category probably contains very little funding for militaryther than the pay and maintenance costs of military personnel working - -directly in niliteryrograms. It is believed that the science funds allocated to the republics through the State Budget are used almost exclusively for civil purposes, as are most ofunds that originate within industrial organs, exclusive of military industry.

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I. Introduction

This report is an analysis of Soviet funding for research and development, with emphasis on financial support to military and space research. It covers the, with projections Overall trends in Soviet financial support for military research and development, including space programs, are estimated and compared with approximately corresponding US data. All of the monetary data reflect current prices.

The analysis is addressed particularly to those specialized readers concerned with the cost of the Soviet military effort or the direction of Soviet science. For this reason, the evidence considered and the supporting methodology are unavoidably The discussion of the complexities of definition and measurementctivity, the inherent uncertainties involved, and the methodology of the estimate, however, are kept for the most part to the Appendix.

The abbreviated term for all Soviet research

and development used in thisR&D

includes basic and applied research, componentdevelopment, and final testing andof new designs, as well as all costs of

space programs. The term militaryefers to that portion ofhich is primarily military, plus all of the space program.

Gaps in information and problems of monetary comparability continue to limit the precision of estimates of total funding levels fcr. While actual expenditures could be somewhat higher or lower, estimated trends in overall growth are probably not markedly different from the actual trends as seen by Soviet leaders. Moreover, since

acliviti' and r'he comparisons with the US that are presented in this report are

TnnSnnnnMXClUSively With COsts ofrendsutlaYS assume greater significance than the actual spending levels. There are no appropriate measures of efficiency in tho uselsourccs in either country that would permit meaningful economic valuations of the outputfforts.

The numerical findings in this reportpecial case among the military-economic estimates published by this Agency. This analysis differs from analyses of other components of Soviet military expenditures in that it is based very heavily on openly published Soviet financial data rather than on computations of the expenditure implications of observed and estimated military programs. intolligeceas information on Soviet scientificacilities and test ranges, and theost implications of developed and deployed weaponsnot yet yielded results adequate for an independent measure of total current Soviet programs or to permit precise insight into Soviet decision priorities in many sectors of

rimarilyack

of sufficient and accurate information on basic and supporting research and onrojects in their early stages.

Despite uncertainties in the details ofcategories relating toompared with those used in thein coverage between thei S believed to exist, mS conJldencebe associated sPendin9 than with abso-

Sm2 articular Point in

fW?meaS^re^ areeasonably

reflection of the costs of committed re-sources as the Soviet planner sees them.

utilitvSthiH Study have intelligence th"eways. First, theyconjunction with estimates of costs meagreoyed weaponsSS sLl elated activity in the be<-ond- they permit conclusions on Soviet

SISS future< *nd

he strategic arena.

y' heyase measure of total

addresses these limited-but importst-Lje?tives.

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II. Soviet Expenditures. Sources of Funds

There are three main sources of fundsn the USSR: the allocation labeled "science" in the Social-Cultural category of tho consolidated State Budget, allocations from other sections of that budget, and extrabudgetary sources such as industrial enterprises (see

The largest of theseoverercent of thethe explicit science allocation. Within this allocation, the all-union portion (central government account) has steadily become more dominant, accounting forercent of the total The all-union science budget supports the Soviet Academy of Sciences, scientific institutes "engaged in workheoreticalnd other works of national* The budgets of the union republics support theiracademies of science and other scientific organizations that are in large pari concernedf local interest.

The budget category called Financing the National Economy <FNE) is estimated to be the source of aboutoercentunds. AI though there is adequate evidence to tieunds to the FNE category of the budget, the evidence does not permit a precise measurement of their magnitude. The Soviets lump FNE funds ith funds provided by enterprises under the

fund

"other/ Nonbudgetary enterprise are believed to constitute an additionalercent of estimatedxpenditures.

Finally, the defense allocation contains nnel-related expenditures for military man-assignedctivities. These costs are almost certainly not included in the announced bovict expenditures for science. They are derived independently and are believed to represent aminor portion of the estimated total.

sources are referenced in thie mannerthe report and are given in Section III of the Appendix.

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B. Estimated Total Expenditures

The estimate of the growth in Sovietforor the, by source, is summarized in The data are extrapolated0 on the basis of current trends. The growth of these expenditures averaged more thanear, as these funds expanded from one billion rubles0illion rubles 31 growth averagedercent;1 annualhave rangedoercent, averagingercent for the period.

The estimated Soviet budgetary outlaysose from lessercent of theState Budget3 to moreercent Although definitional and measurement problems make the relationship imprecise, Soviet expendituresre currentlyercent ofdouble the share3 GNP.

It seems reasonable that such trends cannot continue indefinitely. Growing awareness of the expanding requirementsrograms has brought demands by prominent Soviet planners for more study and research on the economic implicationsctivity. Despite the decline in the rate of growth forxpenditures in recent years, annual incrementsxpenditures are still substantial, and the latest data giveeiling has been reached.

Expenditures7 wore only about 6above lanned increaseas been announced for 3/ However,eneral revision of wholesale prices took place in

* I'l this connection, ) data Gonnained in the recently published Strang 'Jove tovet (Fifty

fears of the Soviet Nation) and Science Policu and Organization of ffg'faroj in the by Unesco, have not been used for thie analysis because of

inconsistencies explained in Section I, C, of the Appendix.

naic-ng (htEconomy Caicf/iy ol Hit Slate

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tho Soviet Unionnd these changes will bo reflected8 expenditures. Preliminary analysis indicates that the net effect will be to increase moderately the costnputs.

In constant prices the planned increase inis probably somewhat less8 percent. 0 we estimate that an average rate ofndercent will occur. The lower limitontinuation of the decline in growtheveling off at about the expected rate of growth for GNP; the upper limit represents moreontinuation of the rates of growth of recent years.

C. Science Funds for Military nnd Space

Published Soviet data for theield several clues which make it possible to derive the aggregate level and to identify the trend of militaryutlays. Relevant sources of funds for militaryre primarily the all-union allocation for science from the Social-Cultural section of the consolidated State Budget and, secondarily, funds from the Defense and FNE categories of the budget and from enterprises of the defense industries.

i. All-Union Allocation for Science

It has been clear for sonic time from budgetary and related analysis that the all-union allocation for science has been the major sourco of funds forf national interest. Given the utrong Soviet orientation toward military RDTE&S, the large and rapidly growing all-union allocation has been viewed as the major source of funds for these programs. One Soviet source clearly associates science expenditures with theof ballistic missile* and the space program.here was, however, little information which'would permit quantification of the amount devoted to military and space purposes.

A statistical handbook published8 provided the first real clues on military RDTE&S. ubstantial amount of accounting detail

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was included in this book on the Social-Cultural category of the consolidated State Budget for the. 5/ This handbook revealed the existencearge and rapidly growing residual in the all-union science account. This residual was aboutercent of the total allocation0 and more thanercent There has been no further publication of such detailed Although the precise nature of this residual cannot be determined, it is believed to encompass much of the funding for the nationallyas atomic research, missile development, and the space program {see the Appendix)

Another part of the science allocation is also believed applicable in order to parallel more closely the US definition of military RDTE&S. Thissuch activities as mathematical research and basic physical, psychological,and medicalfrom the itemized portion of the science allocation and is estimated to be roughly one-third of it. These activities are carried out by institutes of the Academy of Sciences and the Academy of Medicine and are comparable to certain basic research activities financed by the US Department of Defense, some of the more public aspects of space research administered by the National Aeronautics and Space Administration, and unclassified research funded by the Atomic Energy Commission.

2. Other Sources

The total expenditures for science announced by the USSR have alwaysonbudqetary element that was added to theState Budget allocation. Prior8 these other funds were referred to as "enterprisend they were thought to coverhat was financed by settingortion of the gross revenue of plants or industries. Specifically excluded from published announcements were large-scale appropriations for capital from accounts for Financing the National Economy (FNR as well as research performed by teaching faculties at universities. 6/

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9 edition of the Soviet Statistical Handbook published for the first time data labeled as expenditures for science from the "budget and other sources." The new figures for selected earlierere substantially higher than the science expenditures previously announced.he handbook showed no adjustment for that portion of science expenditures from the Social-Cultural category of the budget, therefore, clearlypreviously excluded had been added tofunds to arriveew total forore complete description of the coverage of the term "budget and other sources'* appeared in0 and subsequent editions of the handbook and indicated that the addition represented capital investment in facilities financed from the FNE budget category.nalysis of historical data reveals this new source to be another rapidly growing series (see the Appendix) suggesting that most of these funds were allocated to the construction of militaryacilities, vie estimate that military and space programs received about three-quarters of these funds.

wage, maintenance, and other support costs for military personnel assignedctivities are also included in the estimate of military RDTE&S. The Defense category of the budget is almost certainly the source of funds for such costs. About one-fourth of the enterprise funds are also believed to support military rograms. Soviet sources indicate that enterprises under the jurisdiction of the ministries of the defense follow generally the accounting and pricing procedures in commercial industry. Their prices for military hardware include certain additions above cost, lanned profit, and they make deductions from revenues for special funds.vailable evidence suggests that profits of the enterprises of the ministries of defense industries account for about ercent of all enterprise profits (see the Appendix). On this basis we estimate that the defense industryimilar share or enterprise funds for science.

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The estimate of the growth in Soviet expenditures for militarynd extrapolations of current trends0 are shown in Figure 4. The funding levels ascribed to the several sources are also identified. These expenditures are estimated to have increased from about one-half billion rubles0 to about fivealf billion rubles 07 the average annual rate of growth was nearlyercent. 00 the rate of growth and the level of expenditure were roughly the same as those for equipping and operating either

tiLl ^tPXC off^ive OE strategic defensive force!xpenditures for militaryave grownubstantially greater rate than those for the strategic forces, and7 hadevel -about the same as that of the combinedfor both of the strategic forces.

S militaryxpenditures accounted forercent of total expenditures for all military and space activities. 5 this share increased to someercent. This trend parallels the US experience where spendingrew fromercent toercent of the total 5

Research and Development and Soviet

decision ci spokesmen, iti

.. 0 statements seem to indicate that0 plan goalsxpenditures had not yet been established bynd that the relative proportions for military, civilian, and space efforts had not yet been determined.rticles in the Soviet press havemanagement themes and stressed the need for better

ctivity, some influentialigh official in the adminis-science, believe an accelerated effort in moustrialould be worthwhile even if it were at. the expense of such other programs as capital investment.

Some resources could be shifted withinrograms. Soviet articles have indicated there is waste in militaryrograms which have been strongly pervaded by autarchy. Trimming these

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programs would ease the budgetary pressure generated by expanding strategic programs and by the need ton support of the civilian economy. The degree to which the military is likely toeconomizing at the expense ofrograms cannot yet be determined.

That this appears toubject of military concern at the present time is evidenced by recent arguments in the Soviet military press. The writers have stressed the need for unrelenting efforts to break "newer and newer barriers" and the potential vulnerability of modern weapons to technological breakthroughs. The reiterationhemes at this time suggests some connection with resource allocation issues currently under consideration. These issues could contribute to tensions between military and political leaders over the next few years.

Current Soviet military doctrine holds that support of research and development is an essential function of the "modern military economy." ecent journal lists the three most important military functions of the economy as: covering the current consumption of the armed forces, increasing the stocks of arms, and, chiefly, renovating the material-technical base for combat by developing new forms of weaponry and by replacing the new with the newest.

This formulation brings the modernists in the armed forces and the economic plannersommon ground. ILustification for the economic development of "progressiveepresented by such branches as chemistry, metallurgy', and electronics, and for the development of resources in support of science. Itecognitionn military systems conceivably could be of decisive importanceuture conflict.

Expenditures fornd for militaryhave grown at significantly faster

attention from the planners. Among questions being raised are: payoffresearch for every ruble spenL; long-lead planning; the mix

to be given individual product development

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Atarty Congress in6 the president of the Academy of Sciences discussed trends in the new Five-Year Plan, although he was

^ !issues- For example, he simply noted that, "Questions of the scale of scientific^

research, of the improvement of its organization, of the increase in its effectiveness, and of the quickest possible application of its results are among the basic questions of the furtherof the country." He had nothing further to say about the scale of effort during the plan period. Concerning the other issues, he did indicate that an effort would be made to improve the work of the design bureaus by encouraging "great scientists" to

fanV?iPate.,aCtirly in9 their ideas to fruition. He referred to efforts to improve incentives, and stressed efforts to concentrate the attentions of scientific workers and to avoid diffusion of work.

hving tht partyajor statement by the government was issued defining the current mission of the State Committee for Science and The committee was charged withechnical and economic appraisal of the level of development of science and technology

and With deueloping and implementing technical progress. Thelose cooperation with the Academv of Sciences and with government bodies, to develop

JdnB and to helP establish the priority of the development effort within the economy. The need for this review would explain the delay inong-term plan for science.

oTnerebeen ProPonents of accelerationctivity seemingly related primarily to civilian rsd. in this context Academician

'ty.thc state Committee tor Science and Technology, early/ stressed

competitive development,llocation of resources toengineering.

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Another article appearing in6 alsotrong plea for increases in0 target on tho basisrowth rate averagingoercent. By the author's calculation, the plan7 should be for expendituresillionillion rubles (actual expendituresillionnd he recommended that the forms of financing should be made more flexible in order to stimulate activity in desired fields. According to the author, salaries are too low either to keep the necessary scientific personnel within industry or to attract new

On balance, the tenor of the literature and the array of organizational points of view involved in recent writing suggest that decisions on future funding levels fornd space programs are being widely discussed. Moreover, both civilian and military programs seem to betrong impetus to cull out projects not likely to be profitable and others considered unnecessarily duplicative. Gosplan chief Baybakov specifically

referred to this effort in his presentation of7 plan.

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APi'l-INDIX

This appendix reviews come of the moreproblems involved in the development of data on expendituresor the US and the USSR.overs the conceptnd the related definitions used in the US and compares US and Soviet statistics. Section II describes the methods used to extrapolate and interpolate Soviec data. Section III lists the sources keyed to reference numbers in the text.

I. Concepts, Definitions, and Data

A. PS Concepts and Definitions

In the US, the National Science Foundation (NSF) is the major source for basic definitionsnd for quantitative data which describe its funding and performance. As NSF notes:

The term "research- is often used with considerablesome instances as synonymous with basic research, and in othors as an abbreviation for research and development. Lack of precision in the use of these terms oftenin apparent inconsistencies in the funds that are attributed to "research" performance by different writers.

The problems are practical as well as semantic. For example, there is no clear line of demarcation between research and development and tho preparatory stages of series production, nor between innovative design that results in the development of new products or processes anddesign directed at providing modified products or processes.

In thisovers the whole range of activity that begins with basic scientific investigation and extends to, but does not include,

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commercial or operational production- This usage derives from the following definitions by the National Science Foundation:

Research as an essentialactivity is generally regardedeeking for knowledge and understanding for the direct or indirect benefit of all. research isresearch in which the primary aim of theis fuller knowledge orof the subject under study rather than, as in the case with appliedractical application thereof.

Development builds on the findings of research and leads to specific achievements in diverse areas such as industrial production, medical care, military defense, and air safety. Sometimes requiring exotic and expensive hardware, development accounts uch larger portion of theunds expended in the nation than does

Efforts of this scope have been labeled "research, development, test, and evaluation" activities (RDT&E) by the Department of Defense. Thecommunity has broadened this concept to research, development, tost, evaluation, and space activities ecause of the difficulty of sequestering funding for space activities and distinguishing civil and military space activities in any meaningfully precise way.

B. US Data

The US has been attempting to ntakoconsistent, and reasonably sophisticated measurements of itsffort forelatively short period of time. The resultsistorical scriesundsresented in two ways--hy performer, and by source

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(see industry Is the dominant performer, regularly accounting forercent or more of. The US Government on the other hand is the major source of funds. Moreover, it has provided an increasing share of the funds over the years, aboutercent in3 to aboutercent.

Militaryannot be clearly delineated froms these are not necessarily mutually exclusive categories. For the US, militaryctivities are defined to be the equivalent of those activities covered byudgets of theof Defense (DoD) and the Atomicnd the entire budget of the National Aeronautics and Space Administration (NASA). This definition is workable, but somewhat deficient in conceptual terms. It omits privatelyhich may have implications for military and space capabilities, and it includes some basic research undertaken by these agencies of the kind often performed under the auspicesniversity or foundation. The amounts involved are relatively small and offsetting, however, and would be impossible to categorize fully.

To determine US costs of militaryt is necessary to know the funding supplied by DoD, AEC, and NASA. However, the NSF series Fundsrovides only the total funds received from the government sector (seeetailed informat.on on budgetary expendituresy federal agencies is available from another series, Federal Expenditures for Research and Development, which we abbreviate asexpenditures. "From these data it is possible to computeexpenditures for militarys defined above. Federal expendituresegularly account for aboutercent of all federal expendituressec

The Federal Expenditures series, however, is not directly comparable with "the Funds eries. The Funds for USD data are reportedalendar year Basis and are obtained from performers. Furthermore, Federal_Bxpenditures data include capital expenditures rather than depreciation,

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while Fundsata exclude capitaland include depreciation. Nevertheless, over the long run we should expect these two series to equate reasonably well. They are presented in Table 4. There are sizable differences between the two series in certain years, and foreriodhole, federal agencies haveercent greater than the total reported by the performers. Consequently, comparison of US militaryithn an annual basis cannot be considered precise.

C. Soviet Data Compared with US Data

The Soviet series labeled "expenditures for sciences an older series than its US counterpart. Two basic figures are usually published annually. One figure is reportedomponent of expenditures for the Social-Cultural category, one of the major exoenditure categories of the consolidated State Budget. The second, and larger, figure includes this budgetary account and is described as expenditures for science from the "budget and other sources." "Other sources" include funds of industrial enterprises and organizations, and the items from the Financing the National Economy fFNE) category of the State Budget. 2/ The published Soviet data are shown in Table 5.

The USSR does not provide any direct or specific information regarding the conceptsand the methodology employed in theand presentation of these statistics. Although there are important institutional and procedural differences, Lhe evidence indicates that the USSR does subscribeoncept which is compatible with that used in the US. The Soviets seem to perceive science asange of activities beginning with basic investigation of the environment and culminating just prior to the initiation of commercial or operational production.

The Soviot termowever, is almost synonymous in meaning wiLh knowledge and pertains to much more than just the physical and natural sciences. It covers such additional disciplines as law, economics, history, linguistics, and the like. Fortunately, for comparative purposes, the NSF concept covers more territory than is often realized. To the extent that social science research is financed and performed in the government, universities, or other nonprofit institutions, the costs are included in US Social science research in US industry is not included because it has not been adequately defined to permit its measurement in an accounting sense. Nevertheless, such research certainly would not significantly affect the aggregate industrial expenditures. Becauseoes not require the expensive equipment and hardware of, any differences that may exist in the coverage ofrobably do not seriously affect the comparability of US and Soviet data.

While US data are collected by surveys and are based on prescribed definitions, Soviet data primarily represent the fundingariety of institutions and facilities. When talking about science, Soviet writers refer to "scientific research institutes, design bureaus, scientific research institutions for construction, and project and design institutes or bureaus." The research institutes engage in basic and applied research and development, hence are clearly covered by the definitionsed here. Some of these institutes have associated design bureaus probably involved in the design, building, and testing ofactivity within the definition. The situation with regard to other oroject and esign institutes--those apparently involved in routine drafting and design work for production andunclear.

Science expenditures cannot be related to Lhe various institutes and activities with precision. Budgetary expenditures for science apparenLly suoport primarily the scientific research institutes and" their subordinate institutes and bureaus. The

remaining science funds (those of enterprises and organizations) are not sufficient to support all the various project and design bureaus. It seems reasonable, therefore, to conclude that science expenditures do notarge amount of routine design

The reporting of the performance of research financed by nonbudgetary funds depends in large part upon the reporting procedures of the Central Statistical Administration. The Soviets have indicated that some of this activity may not be reported properly and, therefore, is not reflected in the expenditure data for It appears that the cost of much of the traditional university research, which is performed in school laboratories by personnel whose primary function is teaching, is reported as part of the general operating cost of the university and not as part of expenditures for science. Also, the costerformed in plant laboratories is not always reported as science expenditure. In the case of these possible omissions, however, it seems reasonable to assume that the volume of activity is not great enough toignificant effect on the aggregate data.

US and Soviet data treat capital investment in facilities and equipment differently. The NSF asks respondents to include operating expenses incurred in the conduct of research and development such as wages, salaries, materials, and supplies consumed, property and other taxes, maintenance and repairs, overhead, and depreciation. The inclusion of depreciation, which is not anand the exclusion of capital investment, which is an expenditure, tend to understate actual expenditures during periods of expanding investmentnd to overstate actual expenditures when such activity levels off or declines.

Soviet data do not include charges for depreciation. On the question of capitalexpenditures Soviet sources are ambiguous, contradictory, and inconsistent. Expenditures for science from the budget and other sources have been assumed to include virtually all capital investment. ecent unesco publication on, however, gives separate figures for capital

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investment for thehich aro added to expenditures from the budget and other sources to arriveew total figure forhis process also appears to clear up tho contusion surrounding the larger figures for sciencewhich appearedecent Soviet statistical

The trouble with accepting the new data at face value is that it contradicts other official Soviot sources. The Unesco report clearly indicates that no capital investment funds are included in the data for science expenditures from the budget and other sourcos. Specific figures for capitalfinanced by the science budgets of tho union republics are available, however, for each year0 Similar data are available from the all-union budget0hen the Soviet Union stopped providing such detail, apparently for security reasons. In addition, the official statistical handbook indicates that capital investment expenditures for science are provided by the FNE budget category and are included in the "budget and other sources' expenditure figure (see the discussion of militaryxpenditures in Section II, B, of this Appendix). Until these contradictions aretrong possibility of double counting must be associated with tho new data.

Use of these new data would not have much effect on the rate of growth of sciencebut lt would serve to increase theirbv about one-sixth in each year.

Despite the data problems on bothIron Curtain, we believe the Sovietand the US concept,categories are comparable at lepatin aaggregative sense. There^-fs evidencethat this is thehe Sovietshave shown themselves^to be familiar withfigures ona^Thave discussed theirexpenditures^fn the same contextsignificant reservations about theof thectivity or the

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Interpolation and Extrapolation of Soviet Dat<

order to develop complete annual series for Soviet expenditures fornd for the military and space components, it is necessary toumber of gaps in the Soviet data. Many of these gaps are indicated in Table 5.

A. Total Expenditures

etailed breakdown of estimated Soviet expenditures foror thehe series shown are based on Soviet data with the exception of the cost of military manpower. As explained in the body of the report, this series is computed independently on the basis of estimated military manpower assigned.

The Soviets have not announced figures for total expenditures for science for the For the first four years estimates were made by applying the average annual rate of growth for the12 and for the4he science allocation7 in the Social-Cultural category of the consolidated State Budgetizable increase relativehis increase was too large to be covered byof an average rate of growth. Failure to cover the increase in the budgetary account would implyinanced from other sources declined

It could bo argued that the increase in7 budgetary figure resulted from transferring to this account activities which previously had been funded from other sources. owever, funds from other sources have continued to grow and are always greater than7 figure. It does not seem likely, therefore, that the aggregate of funds iron other sources declLned Total expenditures for science were increased by the amount of tho documented increase in the Social-

ccount of the consolidated State

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The difference between total expenditures for science and expenditures from the science allocation of the consolidated State Budget is believed to represent funds from two sources. As noted in the body of this report, one source is locally generated funds labeled "enterprise funds" and the other is unidentified funds included in the FNE category of the State Budget. For theoviet figures are available for enterprise funds, although in seven of these ten years,have been made because only plan fiqures were No stable relationship can be identified, and the figures9 have been determined by assuming that one-half are enterprise funds and the other half FNE budget funds. This isough approximation, but it iswith the figureshe last year for which Soviet data were available.

for Military RDTE&S

7 presents the components of the estimated expenditures for Soviet military RDTE&S.

1- The All-Union Residual

8 the USSRmall social-cultural, statistical handbook which itemized expenditures for science in theState Budget for the. This handbook provided detail for this accounthole and also for the union republics. Thus, it has been possible to derive the same detail for the all-union account (the central government account) by subtracting the republic data from the State Budget totals.

The summation of the itemized sciencehe budgets of the union republics about equals the total given for these expenditures, lhe detail for the all-union budget, however, leaves unexplained a substantial and rapidly increasing residual. The failure to reveal the detail, plus the size and rate of growth of this residual suggest is probably an important source of military RDTE&S funds. The Soviot government, itself, has identified the all-union science allocation as the

SECRET

"WOrks ofrGscienceIrZ^t and th*

budget handbooks published in

bltLt*Iimited fco ^tail for the republi

enCG- Nofor the total state

?af? for ?hfCl??Ce'-henCemeanS ot derivingfor the all-union account, was included.-

The rate of growth of the residual significant. 0 thi unexplained relidua}3 billion rubles, orercent of the all-

ruh?LSCiKnCe bUd9et- 7 ifct" SC and one-nalf timeshe annual increase in

in tSSi?yai "the annual Ud9Ct grew fcomercent to

^ all-union residual

thehas been continued so that

lncrcase in the all-union

budget which is part of the residual grows to

ercent before stabilizing.

2. Other Sources

The derivation of the series that btate Buaget is as follows:

oled, too, that there are

dstate Secrets Act.

-SECRET

SEC

Total science expenditures*

Less Social-Cultural budget expenditures *

Equal funds from other sources

Less enterprise funds"

Equal net addition to science

51

The total expenditures series, adjusted for the Soviet redefinitioness budgetaryfor science (the same before and after9 revision)eries that tho Soviets call "other sources." 9 the Sovietseries labeled "enterprise funds for science" and this series, subtracted from the revisions announcedringsew series that represents the net addition to total science expenditures resulting fromn reporting procedures.

inister of Finance A. C. Zverev wrote that published science expenditure figures did not include "large allocations for capital Investment and equipment being allotted to scientific research establishments at the expense of the national economic plan." 6/ After9 revisions,0 edition of the Statistical Handbook and succeeding editions describe Social-Cultural expenditures as including

Prom Table 6.

-

seck/f

SEQKET

capital investment in construction provided by the sources for financing the national economy.cience is specifically includedomponent of the Social-Cultural category, and it is quite probable that9 revisions picked up the FNE funds which Zverev had noted as formerly excluded from science expenditure data. The new series grows rapidly, and it is estimated that about three-quarters of these funds are allocated to capital investment in support of military RDTEjrS.

The announced Soviet data for total science expenditures were fragmentary durings, both before and after9 adjustments.lanned figure was announced, but actual expenditures were only occasionally provided. Either by coincidence or design, the revised Soviet figures for annual science expenditures, with the exceptionere not published for the same years for which the Soviets had announced actual expenditures underefinitions. irect calculation of the addition to science expenditures resulting from9 revision cannot be made, as is shown by the following tabulation (in billion rubles):

Announced Actual Expenditures for Science

9 Revision

19

The financial plan for enterprises controlled by the ministries of the defense industrieslanned profit from which deductions are made for the enterprise fund as is the case with civilian industry. 8/ An indication

SEGfRET

of the magnitude of the defense industry profits was providedecent journalhat reported the profits of the various ministries for the first five months No data wasfor the ministries of the defense industries and, significantly, tlie itemized profits accounted for only aboutercent of reported total profits We believe that the defense industries account for most of the remainingercent of profits, and on this basis judge that they probablyimilar portion of the enterprise funds for sciencei

-

SEC* KT

Ill, Source References

Kovaleva, "Financing of Scientific Research

andianovoye khozyaystvo (Plannedoscow,. Translated in

khozyaystvo SSSR (National Economy of

the. tatistical handbook.

V. F. Garbuzov, Pravda, Moscow,

D. A. Allakhvordyan, Soviet Financial System,

Moscow, Progress Publishing.

na sotsialno-kulturnyyogosudarstvennomu byudzhetu SSSR (Expenditures

for Social-Cultural Measures Under the State Budget of the USSR,

G. Zverev, Voprosy natsional'nogo dokhoda

i finansov SSSR (Questions of National Income and Finance of the.

khozyaystvo.

Translated in7

fl. D. P. Andrianov et al, Organizatsiya,

konomika aviatsionnoqo(Organization, Planning, and Economics of Aviation.

9. T. Khachaturov, "Economics of Scientific

teralurnaya gazeta (Literary*oscow,0 Translated in

10. Pravda,

V. Soninskiy, "The Economics of Scientific

konomicheskayaEconomic Gazette), Moscow, f.

12. Izvestiya,

-

r

SECKJH

Buzuyev, "Improve the Financing of Science,"

Finansy SSSR (Finance in theooscow, . Translated in

gazeta.

of insert.

Science Foundation, Reviews of Data

on Science Resources. Vol I, No

,.

.

National Science Foundation,ational

Patternsesources,

Science Foundation,

Federal Funds for Research, Development, and Other scientific Activities: Fiscal Years

and Vol XV. Jul .

.

K. Rudnev, "Coordination of Research: A

Statekonomicheskaya Gazeta,oscow, Translated in6

L. v. Potekhin, I. B. Rozenfeld-and N. Ye. ftin, Planoyyye raskhodyulturnyjtn meropriyatiy (planned Kxponditures on Social-Cultural. Translated

I. Usatov, "For Effectiveness of Scientifickonomicheskaya Gazeta.6 Translated in

Ya. B. Barash, Dogovory na vypolneniye nauchno-

onstruktorskikn

(Contracts for Research and Design. Translated in

SEC^T

A. S. Pribluda, "Legal Aspects of Scientific Research and Experimental Designovetskoyeravo (Soviet State andooscow,. Translated in2

A. Kovaleva, op citbove).

of State,ctivities

of the State Committee for the Coordination of Science, FOR OFFICIAL USE ONLY

Science Foundation,asic

Research, Applied Research

cience Policy and Organization

of Research in the

sovetov zaet (Fifty Years of the

Soviet.

.(Nobove) .

Nimitz, Rand Corporation Memorandum

R, Soviet Expenditures on Jan p

byudzhet SSSR irespublik (State Budget of the

USSR and Budgets of the Union.

khozyaystvo SSSR, Translated

in

V. F. Garbuzov, Izvestiya,. F. Garbuzov, Pravda.,

v. f. Garbuzov, Finansy SSSR,

V. F. Garbuzov, Pravda,

V. F. Garbuzov, Pravda,

- 40 -

SECb/rr

SECRET

Raskhody na sotsialno-kulturnyyegosudarstvennomu byudzhetu.

35. Gosudarstvennyy byudzhetyudzhety soyuznikh respublik, Moscow,I.

Sources of Defense

Expenditures in the Soviet Budget,

gazeta..

41 -

Original document.

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