PAPER ENTITLED " THE SOVIET ECONOMY TODAY" ( S-1358)

Created: 12/17/1964

OCR scan of the original document, errors are possible

CIA HISTORICAL REVIEWIN8 ,

*

the aovigr rcotfag tot*y

ErecUottv and Koeygln face tbe gob* fuodonental econcraie probleaa that Khrushchev with Ms rigorous gambles vas unable to Solve. The Soviet economy today le overccaMitted. Growth rates hare slowed down. Economic administrationpuddled. And the populace continues to grumble aboutlack of ). Lug, tlie poor quality of consumer soft goods andnd the general uadcrfulfUnseat of Utopian promisei. ecent favorablebf good harvest which bos elaunched ths outflow of gold; also favorable la tbe availability of long-tera crudlts for tbe importL-needed oneLiner}est sir: Japan.

Oggrcoajjl_vaent. With on eccoomy lelf the site ofUS economy, the Soviet leadership la attempting to mtcb the US pace ln tl* arms race. *ihe rc.it of gr-wU. cf total .Soviet Military expenditures lias slowed down incosheredt the continued expansion cffforts and tlx Introduction of new ml*alie oyetena is Intensifying the pressure en tl* limited supplies of high-quality satnpouer, naterlala, and equipment. At tbe sag* tlam, tbe leadership sust raise substantially tbe rote of growth ln Investment If Indus trial capacity la to bc modernised ood former rotee of growth In output restored. The bejprogram, vhlcb ealla for vastly increased capacity la fertilisers, plastics,an-ende fibers, already appears tu be dragging because of failuresplcte plantc tn sciiedule and of aurprisingly small imports of oev plant

SFT per.

technology fron the WestnlyO allllon ln contracts to ontoesides defense and Industry, agriculture toousty claimant for additionalev irrigation program end

for the fertilisero Judge fron its delphlc statceents that

ft

efforts will be made to maintain military strength, modernise Industry,

and raise standards of livingle la no rood tooal taenia, although

neither is It likely to pile new ccoaltaanta on old in EhruaUcl^vlon fashion.

Rlcvlng down. Whereas tbe over-all annual rate of advance of Soviet GRP in the .vV'ercent. Ins it isemtoi. Tbe abnormally lew ratesaveragingercentvere caused largely by failures la agriculture. n contrast, agricultural production haa bounced back and CkT growth for this single year cay beerforennce unlikely to be repeated (See tbechart.) aawever, tl* etetany slowdown la tl* growth uf '.rial production continues, even by the admission of Soviet statistics. Our figures, vhlch normally runercent&ge pclota below tl* official Soviet index, show the following annual average growth rated in industrial production1

fc

'?7J

5Jt (projection baaedonths data) last year ln announcing revised industrial plansha Soviet leadership tacitly conceded Uat growth4 would be Plowed because of the reshuffling necessary for the "cheadcallzatloc" program,

but tbe higher rates of growth sdieduled5elief that Industrial production would subsequently eprlng bockevel consistent wltb tbe Bevon-Icex. Sob* moderate laproveoent le Indeed poeelble5 with reepeet to Industrial erovtb.

toddledaJniBtrntlgn. One dubious legacy oftl* new regime isny lien tod end confused structure of IChruahchev'e reorpuiizmtions of both Party endof control cane in eucb rapid-fire order that tbe measures couldhalf dilated. Ue suspect, for example, that tbe bifurcation oflocal Party orennlrations ection to control industry andto control agriculturehas never really taken hold and nayianedlate object of refora by tie new regime. Already the newbaa authorised the extension of an experiment ln decentralisedto one-third of the garment nnd footwearhis experimentIndlvid'Al factory and. fotail trade organization to makequantity, style, asnortocnt, specifications, and, to aprice of eoodo. In August and 3epteaber of this year aarticles in Pravda revived and widened tbe Llbernan propoaala ofTe.beraan of Kbnr'kov bad proposed thatof profit on fixed plus verting capital) be introduced an ain evaluating Industrial enterprise*. Tbe new leadership lathese end other propoeala to "decentralize" and/ortanagesont of the economy. Experloeatatlon la continuing, butchangec car.

expected for tbe time being. Tbe quick decision of Ui new leadership to relax restrictions cm private egricolturel plots le very popular politically and very sensible economically, but Is not representative of tbegenerally temporising approach to problee* of economic adalalstration. Drvsbnev baa promised to rcfora economic aotnagnrent "with circuospectloa and without fuss and baste."

Cons-xxrconsumer made solid gains under Khrtstfcchev.

The deposed lender, bewever, bad unduly whetted coosuaer appetites by blue-oky prooleee such as/ vben be promised to catch up to IB per capita output of neat, mllk, and butter "ln tbo near future." Housing and textiles arc other areas where promises have far outstripped perfonamce; for instance, housing construction baa declinednd the original Qeven-Yeeror housing Is likely to bc tinderfulf iUcd by at leastercent. Further practised, but Inflationary, welfare measures have been delayed! for cnuaple, additional reductions In the vcrtveek, Increases in minimum wages, and abolition of the Income tax. Even with these restrictions, increoeee ln money iucones will continue to exceed Increases in tbe supplies of oonsuaer goods. Tbe new leaders Inherit the expensive promisee of Qu-uahcbev and already have dutifully paid homage to the necessity cf raising living atackdarda. If as expected, they continue the come general programs and policies for the time being, ve can expect little to happen that will allay oxsaer gnrJsles.

paductlon of gold outflow. forced to Import

aboutl Ulan WT of wheat end flour from the Vestoot of approxfcaitely

- Km.

illion. The Soriet gold stock has dropped frees2 billion at Ue end2 toil loo today* The fcraln harvest In

eood allllon JfT compared todlllon KTnd eubetantlal Imports of greln ore no lunger needed. Long-tern credits froa Vestern Europe and Japan of several hundred Billion dollars ore now available for financing imports of nvdiloery needed to aodernlie Soviet industry! use of these credits, however, bos been surprisingly slow so for. As for additional favorable developments, Soviet erporte ere slowly increasing, and higher cotasitnents end drowlnge io the Soviet economic old program are being Increasingly offsetrowing voluae of repayments. Thus, the general picture ln Soviet foreign trade and In the balance of payments suggest that large exports of gold beyond domestic production are at an end. at least far the time being.

Pirelli^ up. t Soviet economy today has Impressiveapidly growing heavy industry and military and space successesand f; Taring weaknessesneglect of theonderous nonage rial system wMch is ill-adapted to the complex demandsodern economy, aad/ most important oflowing down of growth In the face of expanding ccenlt-nente. She new Goviet loaders, assuming they continue In office, are likely to approach these problemseas ebullient fashion than Khrushchev.hange of style say wore better, especially if dogmatism can be kept la check.

DATA FOR THE CHAKT (Percent)

7 8

Groac Rational Product ^9

Industrial Production

Net Agricultural Production 7 13

Original document.

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