central intelligence agency
. C.
offlce of the DEPUTY direcior (jnteuigencej
Hi
lt. col. george v. carrlngtoa,smc
aide to the chairman
the joint chiefs of staff
. c.
dear colonel carrlngton:
this is in response to your requestarch for data on the share of defense expenditures in us gross national product comparable to the data shown in our report for the ussr. the attached, tablesndresent the relevant measures for both the us and ussr. as indicated in table2 were about one-tenth of ghp in both countries.
this measure of relative burden is very broad and may not be very useful in fixing the real impact of defense expenditures on the two economlea. ive alternative measurea which we believe in important respects are more indicative of the impact of defense. these are (l) purchases by the defense establishment from the non-agricultural part of the economy,urchases of durable goods by defense.
enclosures:
aa stated above-
FOR RELEASE
USSR (Billions Of Rubles)
Military durables
Total pr-di:-ion of durables
Military dv_zileshare ofPercent)
;i. US (Bl'Of Dollars?
MilitKV iurablea
Total production of durables
Military durableshare of total durables (Percent)
a.a
3
3
2
/
3.Preliminary estimates based on data in the Economic Reportthe Presicer-t,ca annual US budget reports.
'A/rib& {
3
(Excluding Subsistence) to Cross National
-(gxcludirigat Factor -
ndr
X. USSR (Bullions cf Rubles)
enditure6 (excluding subsistence) a/
GHP (excluding agriculture)
Defense expenditureshare of GNP (percent) (BllllCfle of collars)
defense expenditures (excluding subsistence) a/ b/
GBP (excluding agriculture) _/
Defense expenditursahare of GUP (Percent)
ubsistence includes' food and clotniag expenditures for the armed Preliminary estimates based oz dita in thec Reportreports.
Under Khrushchev's restless and vacillating leadership, yetconprehenalvc reorganization of thc administration of industry and agriculture vaa proposed in The proposed changes call for somewhat acre centralization of the government, apparatus alongore active participation by the Party Ir. economic affairs. Although the full details of the change have not yet been published, it appears to be essentially an administrative reshuffling that does not tackle the basic weaknesses of the economic system.
The strains on the domestic economy are_ Increasedut onlymall degreey the use of resources'lr. tbe Soviet trade and aid program. The net use of resources'involved isractionercent, although the^skilled techniclana, modern machinery, ond, ln some instances, weapons sent abroad arc the same high-quality resources for wbich competition is so keen at honeT It is believed that the potential political and military gains fro* the trade and aid program will continue to be quite large relative to the cost ln resources and that the.USSR will assign high priority to this activity when exploitable soft spots appear in the non-Cp.ijranlat world.
In the aftermath of Cuba It is difficult to Judge what allocation policies will emerge in the next few years. There is strong incentive fog, the Soviet leadership (and strong pressure from military advisers)
_to jteep up or catch up in the arms and space races. The Soviet leaders must be acutely aware, novever, that the armsraces are permitting Soviet economic growth more than these racou penalize US
wtTaT Rapid economic growth aimed at catching up with the US is a
'fundamental long-run Soviet policy, which the leadership will beto sacrifice to an inconclusive military buildup for very long. Furthermore, tbe Soviet people__are chafing increasingly under tbe Inability of their government to provide better quality food, decent housing, and more consumer durables. Although tho most senslble economic policy In this situation might seem toirm
^restraint on expenditures for current buildup of_weapons, it isjudge precisely either the* way in" which the leadership' will weigh its alternative opportunities or the degree of rationality "SEat It will bring to the making of the major allocaUor. decisions.
Mtjb- sis*
I. Generall
The Soviet economy was characterized by rapid growth in the, but rates of growth have declined recentlyin industry5 and in agriculture The major trends in the economy are presented in Tables,ndand in the charts.*
The increase in GNP averagedercent annually for, decidedly less thanercent average for theears. Agricultural performance, vhlch weighs heavily in Soviet GNP,ajor factor in the slowdown. l, agricultural output waoercent above that0 butercent above that Some slowing down was to be expected after the spurt of growth associated with the "new lands" and "corn" programs thatin the bumper crop8 (seend averagedercent annually1 compared withercent59ittle more thanercent0
The recent moderate declines ln rates of growth appear to be largely explained by trends in labor and capital resources and in resource allocations. In industry the most obvious retarding factor0I was the progressive Introduction of the, replacingour week.
Trends in Investment also were such less favorable to growth in recent years than In earlier years. New fixed investment grew at an average annual rate of more thanercent09 (see At the same time, both defense expenditures and consumption grew much more slowly. 09 the total Investment grew fromercent5 percenthare of GNP, whereas the share of defense expenditures declined7 percentercent (seend Nearly all of the change in shares must have occurred since the Korean War. 9 the growth of new fixedhas been reduced,ercent0ercenthe trend in shares also appears to have been reversed1 andith defense expenditures risinghare and Investment
67 especially, diversion of resources from military uses was crucial in maintaining growth of output and investment in the
Tables,ollow on pp.espectively. ** Following
face of tbe raw materials crisishlch vas to lead to tbe abandonment of the Sixth Five Year. harp reduction in ollltary forceslight reduction ln output of militarymadehe expansion of agricultural labor and capital that was required for the "new lands"he continued rapid growth of industrial investment,ery large housingprogram. Two other sources of additional labor were significant ln this period: (l) teenagers pushed into the labor force by thepolicies at that timehe labor Involved in the private housing construction program.
78 the procurement of military hardware has been expanding at the expense of production of civilian machinery. of civilian machinery grewercent andercent6espectively. 7 the increase has averaged about 10 The equipment portion of Investment followed suitear lagn average annual growth ofercent58 and an averageercent8 8roduction of military equipment grew at on average of more thenercent (see Tablend
The industrial reorgani ration7 seems to have produced at least one result unfavorable to growth. nventories have grown, from an already high level,ate exceeding that of total This inventory accumulation must certainly have aggravated an increasingly tight supply situation for tbe.
The cocposition of Industrial growth is shown in Tableside from diverse tendencies in military and civilian machinery, the most notable trends are the foUoving:
The accelerated substitution of oil and gas for coal
Tbe significant slowdown in production of metals, especially nonferrous metals,
The rapid growth of the chemicals industry over tbe whole period;
The very rapid growth of construction materials (including lumber andut with annd
* P. U, below. ** Following* See HI, C,elow.
5. An absolute decline in forest products0l, which almost certainly reflects the Impact of the shortened workweek on this chronically labor-short industry.
A development which is not reflected in the aggregate statistics Is the Industrywide effort to modernize, mechanize, and diversify models and in general to apply new technology. This effort, which is afeature of the Seven Year5pparently is having only partial success. In the chemicals industry, in spite of difficulties in completing new plants, thero hasapid Increase in outputaccounted for by new products such as synthetic fibers and In other industries such as agricultural machinery, hovever,difficulty has been encountered in designing and getting intoiversified line of new aodels. Output cf agriculturalfell sharply8 and has not yet recovered to7 level.
In spite of Khrushchev's championing of the consumer, priorities for consumption have slipped badly in recent years. The relatively slow growth in production of consumer goods (see01 is directly related to the lack of growth in agriculture Agriculture has not been allocated any substantialin investment The total housing construction has been decliningtate housing leveling off and private housing declining drastically. The rapid growth of "nonproductive investment"68 and its slowdown thereafter reflect chiefly trends in bousing construction (see
2 tbe Soviet leadershipumber of stop-gapto adjust to the difficulties that emerged Among thosehe designation of priority construction projects to beat the expense of new starts and other projects in processn Increase in multiple shifts worked in machinery plants to be implemented over the remaining years of the Seven Year Plan. Also, in agriculture an enormous program of converting grasslands and fallow to high-yield (but labcr-and/or-machinery-intensive) feed crops such as corn, peas, beans, and sugar beets was launched last spring. This "plow up" program may produce an increase in output but will clearly require more labor and machinery than is currently available to owever, in the face of adverse weather conditions, the program did no more than help paintain farm output at or slightly less than the level In the longer run, more fertilizer will be required to replace the nutrients formerly conserved by rotation programs.
*elow..elow.
Tne supply of labor is perhaps tighter now than in several years in the Soviet economyesult of the shorter workweek, the halting of demobilization, the leveling off of participation rates, and thecultivated crop acreage in agriculture. The supply of investment goods also is stretched tight by the competing demands of an expanding armaments program, the program to expand and modernize general industry, and the foreign aid program.
The Soviet leadership has some difficult allocation choices to make in the near future. The experience of the last few years stronglythat the economy can not maintain the rates of growth in all directions that Khrushchev appears to desire. The recent decisions to increase meat prices byercent and to maintain tbe personal income tax are perhaps only the first of several difficult decisions which have to be made.
Table 1
USSR; Indicators of Economic
Average Annual Rates of Growth (Percent)
v
output
investment (new fixed) b/
Investment
k
investment
output
averageears
annual average
national product
The base year for the calculations in this column
b. Calculations are based on unrounded data and may not agree vith the rates of growthinhich is based on rounded volume Indexes.
Table 2
USSR: Distribution of Cross National Product (Adjusted Factory End Use
Talus*.Mjlloc Bev SuOles
la^i
ui
7
Total
Tom:
Total
7
9
U
c/
flird
a/
9
Ill- ruble
I
bj umu* waists U) voluaa ludama for
end-use coa*ior>ent.
m.
uf these values uvrr
does act (lis results Identical vlth taooe obtained by wvLlai sector cf origin lndeiss. S* ladeies la thla report (for lirwjTi. Table.bove) ere UtoM derived froai sector ol origin Indues (for exanple, for agriculture and. Ratlasted froaj plan datar scurecs.
e. Because ofny not add to tbe totals ataovti.
4. Isciiae of tkadifficulties la uelag Soviet prleea aad OK*ntliUu la detenu price" In particular, the defenaefbowB Here, laellalle indicator of tbe resource burden of defeat* la ccacarleoa vita otaer countries. Sons effort tae beea Bade to adjust tho defeeea aaara lofetor coat basis so Ual Ute treads la stares are DCaalagful, bat defense probably la -till to lo- In level.
Table 3
USSR: Average Annual Rates of Growth in Industrial Production, by Branch of Industry
/
aalarlals
l 1: pomr
coal
nwim ud gu promrtiattaia sooxarroaa mull 1'
fapai :
locludlcg aynuxtuonstruction natcrlnla b/
ro* notarial*
mtcolaarr
cl.ulan aacbloary
sal
s.1
9-i
i
'.-
6.7
8.9
iB.a
y
11i
0
9.1
'.0
1.9
s.t
m
ii t!
1
6.7
o.j
13
9-9
m
S3
5-9
;
San codda
7-h
adgragata conouccrgsraaatd induatrial nrodikunn
a. lli* iaiw'vcarba eilcolatloecfj eoluao la
v. bhuaiit proautlko of luobrr and alaeln cooatruotloe. bucb pnxlvctlco la includedutcrlaliforaet products aad fcrroua aatala, rsspsctlralr*
c. rurtnar sort la inoandex tuatoran tt* nllltanara. 7ar cxaanla. utsutput of0 prowolj la loo blob. calculations am taul ondata.
Table V
in Crovth of the Labor
1
- fC USSR: GROWTH OF GROSS NATIONAL PRODUCT, INDUSTRY AND
(Volume
2 CO
GNP
0
7D
SOCKET
USSR: GROWTH OF MACHINERYVolume)
3
CIVILIAN MACHINERY
1 2 3 4 5 6 yttSJ 8 9 0 1 2
6
II. Economic Policyhe Leadership
A. Summary of the Period9
Many of the difficulties that the Soviet economy is experiencing2irect result of policies identified with Khrushchev. His style of leadership was in evidence even during the period of collective leadership and, of course,7 has dominated the scene. This style can be characterized as one of chronic optimismconfidence that the Soviet economy can move steadily and rapidly ahead, meeting thedemands for increased defense, growth, and consumption. Whenmake it clear that production will not meet all the important demands, Khrushchev tends to turn to new forms of organization schemes. This faith in organizational changes stems from his rather naive belief that he can provide the right administrative setting to release large internal reserves.
The fine old Bolshevik tradition of carrying out policy by sweeping campaigns has neverore enthusiastic practitioner than Khrushchev, whether he is expanding sown acreage or introducing new technology in industry. When organizational changes and programs to raise output fail toate of growth high enough to meetcommitments, however, Khrushchev tends to hesitate in reducing coimitnents. His methods of solving economic problems have sometimes led to the growth of new problems.
Cumulative evidence suggests that neither of the two majorchangesn industryn agricultureas been successful {seend Agriculturalabove the enterprise level underwentor changes1 Although there have not been radical inodifications in industrial organization the tendency has been to add "new layers" of production and supply organizations to overcome the more obvious problems. The recent changes in organization announced at the November Plenum of the Central Connittee of the Communist Party continue the series of administrative reorganizations begunll with the common purpose ofore efficient result without aoverhaul of the system.
Two further developments that illustrate Khrushchev's overoptimisra about obtaining gains in efficiency from tbe economy are (l) tbefor introducing new technology in the Seven Year Plan and the
-elow. ** elow.
projected productivity plans based thereonhe decision in
proceed with the substantial reduction in the workweeknonagricultural sectors.
Khrushchev has had core success In his innovations that have affected agricultural output. The "new lands" and "corn" programs probably accounted for more than one-fourth of the Increase in farm output3 Khrushchev's luck in tbe "new lands" program may beit each year, however, and may have given rise to2 Innovation, the "plow up" campaign (see.
Tbe striking success ln Increasing farm output in thosector8 must have led Khrushchev to base future commitments on the assumption that tbe rate of output would continue to grow rapidly. Thus be simultaneously insisted on large increases ln output of meat and milk, made promises to consumers to raise coney lncorses to pay for the meat and milk, andampaign to restrict private agriculturethe major producer in
meat and milk. These latter two policies resulted lnpressures, falling output ln the private sector, andincreases for animal products.
In summary, the economic policy decisions9 most closely associated with Khrushchev have not turned out to be very successful.
B. Current Issues and Policy
Policy discussions and decisions in the Soviet context have an "iceberg" character. For motives that probably differ with every case, the Soviet leaders sec fit from time to time to partly disclose to the public, both domestic and foreign, their policy discussions of pending decisions. An nnalysis of Soviet intentions in tbe broad area ofallocation based on the partial disclosure of policy discussions and disagreements is complicated by tbe highly general nature of the announcements. For example, on tbe issue of resource allocation to consumer welfare which is discussed below, it is seldom clear from tbe public statements of the leadership what magnitude of change incommitment is under discussion and what the range of alternative choices is.
Betweennds in the preceding period, Khrushchev appeared to be concerned about the need to increasewelfare. This concern was illustrated in the first half1 by his suggestion that tbe consumer-oriented policy be enshrined
* elow.
new law of socialism"in plain words, that the rale of growth of light industry be raised to that of heavy industry.
It remains unclear, after all of the verbal pyrotechnics from Khrushchev on shifting additional resources to consumer-relatedwhether or not an appreciable change ln short-run priorities and/or allocations ever did take place. Tbe best indication of an actual shift came in the fall9 with the announcementear prjgram for cor.su.-aer durables. Apparently related to this decision was Khrushchev's admission to Ambassador Thompson at tbe same time that only with great difficulty had he persuaded his colleagues to agree to the allocationillion icetrie tons* core steel to the civilian sector. He contended that this had been of "enormous value and hadinor effect on military and other needs."
At the time of the announcementroop cut Inhrushchev was quick to point out that the savings in the military budget, estimatedillionillion rubles annually, would "create additional possibilities for raising the standard of ." Tbe only hard commitment of additional funds to this endupplemental allocation* million rubles to the civilian sector lnirectly tied to the reduction ln the armed forces. Thereurther claim by Khrushchev In0illion core rubles had been expended on tbe sugar, meat, and textile Industries. Khrushchev nude it clear in the same speech, however, that he had larger allocations in mind when he said that supplemental allocationsillionillion rubles (equivalent toercent of new fixed investmentbove the original Seven Year Plan were being earmarked for the development of the textile and footwear industries and the expansion of agriculture.
Khrushchev's public speeches0 andonfidence that more resources could safely be channeled into consumption without any retardation of economic growth or weakening of military power. For example, ln his0 announcementimited reallocation of resources to civilian needs, he made explicit the links between increased output of consumer goods and reduced defense Eight months later, at theI Plenum of the Central Committee, heew "law of socialism" that "production ofgoods should always exceed publicn order toore ambitious welfare program. Accordingly, Khrushchev felt called on toheoretic rationale for his position, embraced in Marxist Jargon, and to declare Stalin's "law of soclallsa" to be(according to Stalin, production of goods under socialismlagged behind the growth of demand).
* Tonnages are given in metric tons throughout this report.
- At the same Plenumhrushchev argued against the "policy of developing ferrous metallurgy to the absolutee berated "some comrades vho had developed an appetite to give the country-more metal" and warned thatesire might be detrimental to consumer interest. If they (the Soviet leaders) permittedto develop in the economy, it would result in "betraying the confidence of the people." He warned:
We must do everything possible to see that our economy constantly satisfies tbe rapidly growing needs of the population. Otherwise, there mayiscrepancy between tbe purchasing power of consumers and the possibilities for satisfying their demanda situation fraught with dangerous consequences.
That these words in1 wera to be prophetic wasearalf later when it was found necessary to offset excess purchasing powerignificant rise in food prices.
Also at the same January Plenum, Khrushchev contended thatillionillion rubles authorized by the0 Supreme Soviet as supplemental allocations to agriculture and light industry werensisting that "in spite of the threats of the Imperialists" the USSR vasosition to divert morewithout prejudicing the Interest of heavy industry and Helue to the magnitudes that he had in mind when1 he made the following statement in the presence of Western correspondents: "Sow we consider our heavy Industry as built, so we are not going to give It priority. Light industry and heavy industry will develop at the same rate." This old "Malenkov heresy of equal rates" was not repeated ln the domestic media,onth later Khrushchevpeech in which he said that "aide by side with heavy industry, light and foodill berapidly."
However,1 appears to haveurning point in Khrushchev's thinking. Voluntarily or involuntarily, he began to soft-pedal the welfare line, and the best that he could do atarty Congress inI was to reiterate the decision toupplemental application of "aboutillion rubles" to light industry and agriculture. The general tone of the speeches and the final Party Program at the Party Congress was one ofemphasis on the traditional lines of economic development. The consumer welfare aspect was mostly relegated to grandiose promises
i&(rsi%
O The slogans for catching up vith the US in meat and milk consumption in the near tern and Khrushchev's "new lav of socialism" were either ignored or dampened.
As the strategic problems1 became more evident, Khrushchev was persuaded that diversions to consumption would have to be postponed. Very likely there was strenuous argument within the top leadership about the allocations of resources in this difficult period. It is suggested that Khrushchev was persuaded not only by the arguments of his colleagues but also by what he is fond of calling "life itself."
Since the Party Congress,ear ago, the evidence ofover allocationel issues has been weak and somewhat ambiguous with apparently short-run agreement to "hold the line" and indecision over choices to be made in the more intermediate term. Certainly, the recent decisions in agriculture must be considered as temporary Khrushchev at the opening of the2 Plenum showed signs of his old enthusiasm for "'diversion of resources" to agriculture but backtracked somewhat ln his closing remarks. At the opening session he said:
Theo questions of increasing material and technical assistance to the collective and state farms has slackened ln the pest two or three years. Furthermore, some officials display unconcern and irresponsibility in solving the urgent problems of increasing the output ofmineral fertilizers, herbicides,ome leaders think that all questions of the mechanization of agriculture have been solved and that now it Is even possible to take something away from the farm machine industry for other branches of the economy. These are very dangerousand they must be. hink we began shifting farm machinery plants prematurely to the production of other items, sometimes far from the essential ones.
Hen this vein stressing immediate needs but carefully not mentioning sums of rubles to be allocated. At the closing session his tone ensnares:
Measures for Increasing aid to agriculture do not signify that resources will now be diverted to agriculture at the expense of development of industry
and the strengthening of the country's defenses. The strengthening of the might of the Soviet Union, of its defenses, is our most important task, and we will perform it unswervingly. This is the foundation of the existence of cur socialist state, of its development and successes. This does not meanm in any sense retreating from the position taken in the report concerning theof additional material and technical resources for agriculture. Ko, the question of strengthening assistance to agriculture must he solved, and it will he solved. But,epeat that we must first of all make intelligent use of the machinery already available to agriculture.
The tone of indecision on resource allocation in2 was carried over to an interview in April when Khrushchev told Cowles that no decision had been made on the timing of the manned flight to the moon. Kozlov also recently has complained to another foreigner about the high cost ofroject.
Although Khrushchev had practically promised no retail pricefor food in March, the announcement in June of sizable pricesuggests that the problem of inflationary pressures was being faced in more straightforward fashion. The reports of civil disturbances associated with these price increases and the appeals from provincial officials for additional aid in coping with the "plow up" program intensify thc multiple pressures felt by the leadership and make decisions with reference to competing priorities that much more difficult.
In short, Khrushchev has rather consistently been on the side of
the consumer, at least as much as one could expectociety dedicated to the growth of heavy industry and military strength. Beginningowever, he has not had his own way very much, although the discussion and controversy over policy probably has not led to strong factionalism or deep division of opinion within the top leadership. Nevertheless, if It is correct to believe that Khrushchev's past performancetrong desire to raise consumption, the recent erosion in tbecampaignsapidly expanding military program is surely not
to his liking.
III. BcoDOQlc ProaJccs
A. Problems in Investment
The oost serious symptom of slackening rates of growth in the Soviot economy comes from the side of investment. Large expenditures on new fixed investment have fueled the rapid growth rates of the past, and future levels of output areeflection of presenton neu plant and equipment.
The data in Tablesuggest an casing off of investment flows to industry and agriculture. The rate of increase ln industrial investmentas the lowest in the postwar period. The actual commissioning of new capacity in industry probably increased at an even lower rate than productive Investment, the volume ofconstruction growing more rapidly. In order to maintain an average rate of increase in Industrial capital stock ofs, gross investments in new plant and equipment increased at an annual rate ofercent. The announced plans for Investment2 do not suggest any significant Increase in investment growth
The structure of industrial Investment over the past decade has varied because of changes in the economy's demands and,maller extent, because of changes in cost of introducing new capacity. In the first half of tbe decade the rate of increase for tbe several branches was nearly the same as the over-all rate for industry, with ferrous metallurgy lagging behind.
Tbe shortfalls ln output in tbe basic sectorsuick response from the regime. For tben Increased emphasis was given to basic metals, coal, electric power, andmaterials. After the flow of new capacity in materials and energy regained balance with other branches, there was another shift in the patternnew eopbasis on machine buildingery rapid increase in chemicals.
Tbe general slowdown in Industrial investment9 bas affected rates of increase In all the branches. Investment ln machine building has declined only moderately in annual increment, probablythe increased supporting role that this sector Is giving to defense and space programs. The moBt ominous indication of continuing investment problems is tho low increase of investment in the construction
ollows on
Table 5
USSR; Average Annual Rates of Growth of New Fixed Productiveby2 Plan
Percent
Plan by
all sactors
a
total
and pover
c/
building
J
oaterials
construction
industries
d/
Ii
and communications
The base year for the calculations ln Ibis colunn
rates ore for state plan investaents only. Ihe other data in tbe table are for the total The rates of increase in state Investment, by branch of industry, during the first halfirst halfere generally lower than the plan rates for the year. Rates for the first halfwere aa follows: ferrousercent; chemicals, lk percent; fuels andercent; and consumer industries,ercent.
that investment ln the coal industry was not planned to Increase
industry only, excluding the food industry.
caterials and construction industries onths' report2 indicated, an actual decline la investment in these industries.
The cyclical changes in agricultural investment durings closely followed Khrushchev's innovations ln land use. Peaks5 and8 reflected the machinery support required to undertake the "new lands" and "corn" programs. The decline in machinery allocations to agricultureO0 dampened tbe over-all rate of increase in output for the sector.
The rather sharp upturn in agricultural investment1percent increase) would suggest, at first glance,olicyhad been made to give higher priority to agriculture in theof Investment resources. Because of heavy retirement* of agricultural machinery, however, the net increase in machinery stocks was actually below the average5 percent compared with an annual averageercent for theears. Although there was much talk about increased Investments in agriculture at both the March and November Plenumshe lack of firm commitments, tbe ambiguity in Khrushchev's statements, and the indecision aboutin industries supporting agriculture suggest that onlyincreases in resource allocations have so far been made and that indecision about major commitments remains.
Construction of new housing, both state and private, wasrapidly- She drive against private activity beginning0 ccabiced with the lover priority given housing in competition for state resources has resultedmall decline in investment in new housing construction over theears.
The failure of industrial investment to maintain steady Increases over theears is less understandable than the lag for otherundamental tenet of Soviet economic policy is to favor growth. Under Stalin the leaders quickly compromised goals in theousing, agriculture, and light Industryia order to increase industrial investment. When high rates of growth were endangered, however, the leadership reacted by trimming allocationa in the defense sector. As of the beginninghe leadership has yet to come out clearly in favor of growth at the expense of the other sectors.
There are certain common elements underlying the problem* facod by investment programs ln all sector* of the Soviet economy. The volume of press commentary on the lack of coordination between the producers of construction materials and producers' equipment and the investment planners and builders suggests that this problem was worse than usual. The deteriorating supply situation depressed the over-all Increases in voluae of investment. More than that, the continuedon ofamong too many projects together with the slowdown in Increase
"shown to consumers of high-priority equipment. Thus, in the first halfl,ractors were rejected by inspectors at the major tractor plants because of defects in quality. The reject rate in one plant had increasedercent over the previous year. The tractor producers specifically complain about the low-quality fuel systems and electrical components that they receive from outside suppliers. After the machinery passes inspection at the producing plant, there is another check at the wholesale level. At this nextf all products actually shipped by the tractor plants1 and more thanercent of the products of agricultural machineplants were rejected.
The increase in deterioration of quality also is evident in some consumer durables. Approximately two-thirds of all television receivers are currently being sent in for repair during theonths after retail sale, and replacement parts are in short supply. These are new model television sets just introduced
A general indication of the problem of maintaining quality is the announced increase in losses from defective production inupercent1 compared
Under the strains cf the deceleration over theears the nonproductive elements in investmentfor example, housing, municipal services, and schoolswere reduced more rapidly than the productive elements (see. The interesting exception, the continual increase of investment in nonproductive equipment, suggests that rapid increases in urban population have forced the government to expand investments in equipment for municipal serviceswaterworks, sewage disposal, and the likeegardless of pressing priorities from other sectors.
The response by the regime to the slowdown in formation of new fixed capital has been as one would have predicted. Measures taken include reduction in new starts, concentration of resources on priority projects, and an even greater concentration of resources on theand modernization of present plant facilities than was originally intended. The reduction of the number of new starts on "green field sites" reduces initial overhead expenses (such as rail and other service facilities) per unit of new capacity. The failure to carry through the planned magnitude of investments in the eastern regions (Siberia and Central Asia)ompromise with short-run production needs at the expense of longer run productivity gains by expanding existing plants in the developed western regions.
* ollows on p. 2k.
ussr: average annual rates of crowth in new fixed investment, by function
An important consequence of delays in commissioning new capacitylowdown in retirements of old plant and equipment. The Seven Year Plan goals implied an average retirement rate of the industrial capital stock (at the endf moreercent per year. Thiswould be the most obsolete and high-cost plant and equipment, and by replacing it with new stock, important cost reductions in output were to be obtained. The data for theears of the planetirement rate only one-half as great as the average anticipated rate. Failure to retire capacity in coal, ferrous metallurgy, and electric power will give temporary, if high-cost, relief, assuming that new capacity continues to be inadequate. How far this device can be used to moke up for investment shortfalls is uncertain.
Another characteristic response of the regime to presentt problems Is to recentralize much of the planning and supply of the minor share of investment projects formerly left to republic or local bodies. The control organs have been alerted, and the provincial Party secretary who has had Ideas about diverting materials and equipmentocal theater project will now be under closer scrutiny.
All of the above policies for dealing with pressing problems in investment and new capacity have been used at ono time or another In the put. In essence they are stop-gap measures, most of which tend to sacrifice longer run productivity gains for ahort-tera production needs.
B. Problems in Industry
The lower rates of growth experienced in Soviet industry since tbes seem to have had their origin in the following twodevelopments: (l) Increases in inputs of man-hours camealt as the result of the reduction in the length of the workweek,ains ln the increase in output per unit of input slowed down
The total number of people employed in industry increarsedairly constant rate, but the total number of nan-hours supplied1 was practically the same as The transition fromhour tohour scheduled workweek was remarkably smooth, and there were clear indicationsf gains inper man-hour, enterprise managers being under pressure to maintain output after the reduction ln the workweek. Such gains, however, were limited and nonrecurring. Furthermore, they wore characterized byof resources in producing output from capacity already in operation rather than froa obtaining further increments in output from the same resources or from new capacity. The evidence to date strongly suggests that the program for reduction of hoursampening effect ongrowthO-6I.
A/Mb 'isil&tr
l'
ery Important element in the growth of modem industrial societies is related to gains obtainable from factors other thanin labor force and hours of work or from additions to the stock of capital (machinery, equipment, buildings, and the like). These "non-conventional" factors have rather intangible characteristics and include such divergent items as new technology, improvedigher level of training, and material incentives. The role of the nonlabor and noncapital elements has been important to Soviet industrial growth in the past and is being counted on by the regime in the future.
The contribution of these factors to over-all industrial growth can be approximated by relating the changes in actual output to the changes in inputs of labor and capital. The difference between the change in conventional resources and outputeasure ofgain expressed as the increase in output per unit of input.
The data inive the trends in resource use andin industry The data are far from precise, and the results are presented only as an indication of general trends. Indexes of resource productivity in industry are given in*
Table 8
USSR: Industrial Growth and Changes in Resource Use and Productivity
Rates
Growth
a/
services
output
in output not
for by in-
in inputs
The base year for the calculations in each column is the yearthe stated year.
* elow.
Tho experience ofs reflects unevenness ln industrial growth attributable to increases in resource productivityajorinra, especially in the years after Stalin's death, were replaced by relatively small gains in tbe. Tbe Improvementn resource productivity may have beenrelated to gainB in efficiency from tbe reduction in tbeand thusne-time character.
The major clement, however, in explaining longer runbetween Increases in Inputs of labor and capital and increases in output is new technology. The data available for planned resource use in industry in the Seven Year Plan, for example, suggeat that tbe regiae hoped to obtain alsost half of the increase ln industrial growth85 from productivity gains.
Ihe principal part of this planned gain in output per unit of input would be related to raising tbe proportion of new plant andthat incorporates new technology. Most of tbe new techniques to be employed are not fresh from the laboratory but reflect an adaptation of known and proved technology already in industrial uso in domestic or foreign plants. Tho empbasls on new technology has been highlighted by the official campaign tactics employed over theears. Special decrees, income incentives,ew bureaucracy to expedite theplans areew of the indications of the intensity of the drive to raise the productivity of aggregate resourcesroadof advanced technology.
For several reasons this assimilation has not gone as rapidly as planned. It is believedajor factor in the mediocrerecently has been the competition fron defense and space pro-grans for tbe required high-quality resources. Tbe introduction of modern industrial technology In new plant and equipment calls for tbe highest quality Inputs, both men and equipment. Re search andof military application particularly demands advanced and precision equipment, special materials, and the highest caliber of designers,technicians, and project leaders. The heavy use of these highest quality resources cay haveag ln the adoption of technology in civilian sectors of the economy.
C. Organizational Problems of Industry and Investment
The Industrial reorganizationnder which regional sovnarkhozes replaced the former industrial ministries, exhibited the main characteristics of Khrushchev's approach to economic management. Under tbe label of "democratichrushchevore flexible implementation at local levels of objectives set at the center. Tne assumptions underlying this approach seem to bo the following:
A reliance on Inspirational, highly motivated leadership at all levels as opposed to fixed administrative rules and hence afor Party men and organization over government officials and bureaucracy;
An implicit belief that efficient means leading to good results at local levels are self-evident to any honest man of common sense, as they always were to Khrushchevhe looked closely into any particular situation; end
A conviction that it Is feasible to eliminate by "democraticheof wastes and inefficiencies in the Soviet economy which are quite obvious to Soviet aa well as Western observers.
The subsequent history of the sovnarkhoz organization proved
Khrushchev's ideas to be administratively naive. Localism and other symptoms of deviation from the general objectives of the central leader-snip have lederies of patchwork decrees which have steadilyfreedom of action of local authorities. Recent officialhowever, indicates that organizational stress continues and may even be worsening.
At the November Plenum of the Central Committee, Khrushchev
proposed what appears to be another comprehensive reorganization not only of the government economic apparatus but also of the Party. tbe many important details of the recent organizational changes have not been announced or possibly even decidedit does notthat the reorganization effectively deals with the deficiencies which have plagued the economy recently and have been vigorouslyin tbe Soviet press.
The primary deficiency of present organization is duplication
of authority and responsibility. The enterprise manager operating under the present system finds that he has several bosses who can levy production plans on him and, worse yet, several organizations which are
f
riors who pass down production quotas may or may not have control over the other enterprises and supply agencies that must meet deliveryto assure fulfillment of production plans. ystem for effective coordination of plans made by various authorities and of supply with these plans has not yet been found.
Under the old ministerial system, whatever its other faults, "each enterprise had one boss for determining plans and providing Under the present system, bosses are located geographically and vertically at various levels. Froa the side of production planning, for example, part of the enterprise's production may be planned at the economic region level, part at the republic level, and part by the All-Unlon planning agency (Gosplan) la Hoscow. In one case the managerachine building plant complained that seven different agencies from the oblast to Moscow leveled production plans on his plant and that the nominal superior, the aovnarkhoz, seemed to be unable to stop the From the allocations! side of supplies, there are functional departments within All-Union Gosplan which have control over particular materials and machinery, and other materials are allocated by republic organs and some minor materials by the sovnarkhoz.
The most concrete evidence that7 reorganization is not going as planned is the rapid increase in inventories emporary letup ln the rate of Inventory accumulationhen Khrushchev vas literally peeking ln warehouses to press his campaign against hoarding of materials and machinery, the rate of additions to inventories increased rapidly. otal Inventories in theamounted toercent of GNP for that year comparedercent I" the USnventories were less than one-fourth of GNP.
This rapid Increase in stores of fuels, materials,spare parts, and machineryombination of two supply problems: ersistent penchant of industrial managers to hoard materials and parts because of uncertain supply arrangements and,ack of effective coordination in obtaining the precise assortment of output needed. This latter element leadsurplus of some items and shortages of other3. For example, the stocks of rolled metal held by users cameillion tonshereas the inventory norms called forillion tons. As the commodities become less homogeneous in nature the coordination and supply problems multiply. The emphasis on problems of control and inspection at the recent Plenum suggests that additional efforts will be made to reduce hoarding and enforceobligations of producers to supply the proper assortment to users.
The present system of organization and management affecting production plans and supply elso is related to the currentperformance in investment. One of the primary reasons why the voluae of unfinished construction and uninstalled investmenthas been Increasing more rapidly than the total investment over the past year is the failure to link investment plans satisfactorily with material and machinery supply plans. The failure of planning
"
leads"to more building projects being in band at any given moment than can be supplied with metal, cement, and equipment. Thus tbe oft-beard complaint that investment funds remain unexpended because the necessary materials and equipment do not arrive or that ruble allocations areto spend on physical resources available at another building site. The temporary solution on tbe part of tbe central planners is to setist of priorityevice frequently used in tbe past. Although this procedureemporary increase in completions, it usually raises investment costs on tbe priority project and means that less important projects remain unfinished and others, perhaps, unstarted.
esult of the above trends in production and Investment supply, planning, and operational control, there hasendency to recentralize in piecemeal fashion many of the allocation and Investment decisions which could be taken at tbe local level. From the side ofthererastic reductionl in decentralizedand2 the limit on investment projects that require review and approval by the Council of Ministers, USSR, was loweredrubles. Even this low level may have been eliminated at the recent November Plenum, which took measures further to tighten central control over all construction. Cosstroy, the central construction office. Is to set up priority lists on all projects, set standards for building designs, and coordinate production and supply of building materials.
In general, the other proposals by Khrushchev at tbe Hoveaber Plenumontinuation of tbe piecemeal changes7 and in tbe same directionfurther emphasis on central direction of tbe economy with the gradual erosion of the limited area of freedom of action conceded to the local authorities Probably tbe most important change was the creation of vertical Party organisations from Moscow to tbe enterprises (with separate structures for agriculture and industry) to make the Party directly responsible for the operatingof the economy. This stepreak with the long tradition that held that the main function of tbe Party official is in the realm of propaganda and ideology, not in tbe direct control and operational
responsibility of the economy. This emphasis on the formalof Party men on tbe carrying out of the leadership's directives is consistent with the character of Khrushchev's approach to economic management that is suggested above. This approach, however, does not pointorrection of the problems of duplication of authority end lack of coordination of supply and production plans about which enter-
2 years. The encouragement of administrative intervention by the Party committees called for in tbe proposals is more likely further tolines of authority than to clarify them. Although some short-run improvement, perhaps by reducing inventories, can be expected from the
K
"recent changes, it is not believed that the proposed changes willimprove tbe efficiency of use of resources over tbe long run.
It has been observed that socialist central planning can effect aggregate balances and major adjustments as necessary but, in contrastree market system, cannot make the multitude of fine adjustments that constitute efficient operation on the part of enterprises and Khrushchev in effect has been demanding that the Soviet economy learn to make fine adjustments, but without providing market institutions. Effective implementation of decentralized decision-making requires the substitution of market prices and profits as objective criteria offor physical output goals and administrative allocations of supplies. There has been no indication over theears, nor is it believed to be likely now, that tbe Soviet leadership will movea system of market socialism as now practiced, for example, in Yugoslavia.
The more drastic reform of prices, incentives, and planning, which alone would make possible tbe much-needed genuineseems far away. Although such reforms have been proposed by Professor Liberman and other economists, Khrushchev in his recent speeches has barely recognized these proposals. Thus the discussions to date attendant on the reorganization announced in November suggest no important changes in the role which prices play in tbe working of tbe Soviet economy. Wholesale prices for heavy industry apparently will continue to influence, but only passively, the decision-making processes from tbe Presidium to the enterprise managers.
Tbe recent increase in meat and butter pricestep to bring demand into line with supply in one outstanding case of The reluctance and apologetic manner of the announcement of the meat price increase does notillingness to use price changes systematically throughout the economyasic guidance method. In housing, for example, rent is about one-third of tbe cost of operation and maintenance. arge increase in rent wouldong way tothe bousing shortage and providing funds for investment in housing.
D. Agriculture
Agricultural production increasedercent in tbe decade ofs, mostly after Stalin's death. This large increase was mainly tbe result of seizing opportunities that bad been neglected in former years, notably opportunities for increasing acreage and incentives. etter perspective of tbe long-range possibilities in Soviet agriculture
' For more details concerning tbe organizational changes announced at tbe November Plenum, see VI,elow.
is suggested by not lag that the increase in production0 wasercent, or at en average annual rateercent.*
Agriculture has provided and will continue to provide sufficient calories for the Soviet population. Khrushchev's concernandproblemis to raise the quality and variety of food
Heather conditions over theears have not been asas over theears. The current decline in the rate of growth of agricultural production is explained chiefly, however, by the exhaustion of one-time gains and by the unwillingness of the Soviet leadership toigher level of resources to agricultureontinuing basis. Resources in this context mean not only quantities of higher quality resources in the conventional senseabor,fertilizer, and the likebut also greater Incentives to produce in the formigher real return for work ln socialized agriculture. Thereubstantial improvement la the priority of agriculture from Stalin's deathut since then policy hasendency to vacillate. For example, allocations ofmachinery were rapidly increased uput havesince then. Income measures and consumer goods allocations to rural areas assured theelative rise in real income38 equal to the rise in real income of urban wage and salary workers, but over theears there hasecline in farmwhile urban incomes have continued to rise.
Another difficulty has been that consumer goods rejected by urban trade units have been dumped la rural areas. Finally, Incentives were adversely affected by the government measures tending to restrict private holdings of both peasants and urban dwellers, holdings which had been contributing more than half of all livestock products to the economy as well as substantial portions of vegetables.
It is estimated that the resources committed to agricultureland, manpower, fixed capital, livestock herds, fertilizer, fuels, and other inputsincreased on theercent per year ln theutercent per year in. If the increase in sown acreage is excluded, the increases aretoercent per yearercent.
* Soviet agricultural statistics have become Increasingly unreliable in the last few years. onsequence, the Independent estimates uoed in this discussion have an appreciable range of error. The estimated general treads presented in the text, however, ore believed to be.
The problem of the quality of tbe inputs into agriculture is illustrated by Khrushchev'8 complaints about tbe poor design andcondition of agricultural machinery and by official statistics that pointery short life for agricultural machinery.
Ihe recent increase in the price of meat (byercent) and butter (byercent) indicates an official concern with peasantalthough time only will tell the extent to which the price increases will be reflected in higher peasant income from socialized activity.
The latoat major program for agriculture is the "plow up" campaign to plant high-yield cropsorn, peas, beans, and sugar beetson land formerly sown to grasses and oats or lying fallow. The magnitude of this program, which was announced in2 and was two-thirds completed during tbes roughly comparable to the "new lands" campaign in manpower and machinery requirements. To date, however, no large-scale expansion of the supply of machinery, fertilizer, skilled manpower, and other vital inputs has been announced to round out the program. In the case of farm machinery operators,evidenceapid migration to ncnfare Jobs.
Part of the "plow up" plan appears to be especially dubiousnamely, tbe part that relies on greatly reducing tbe amount of fallow land in the "new lands." Thisase of double jeopardy. Theof fallow in the "new lands" willroblem that already has cropped upa deterioration in grain yields. Compromise with good soil management procedures has caused increasing problems of weed control, moisture preservation, and wind erosion. Another part of the new plan is the intensive use of land formerly sown to rotational grasses. The abandonment of tbe grass rotation system in the northern USSR without supplementing the supply of soil additives (fertilizer and lime) carries the risk of depleting soil nutrients.
In the short run the abandonment of tbe grass rotation system and the reduction of fallow could resultizable increase inof feed crops. , however, in tbe face of adverse weather conditions, this policy did no more than help maintain agriculturalat or slightly below1 level.
Another response to agricultural difficulties is organizational change. Khrushchev, displaying what Pervukbin termed7nnounced last March another reorganization inadministration. This latestong series of organisation and oanagecient moves dating back3 continues the current trend of weakening the position of the government bureaucracy and enhancing the position of tbe Party in agricultural administration. Now, for the first
time, the republic and oblast Party bosses haveormal part of the state administrative machinery for agriculture. The currenttends to formalize centralized decision-making, ln contrast to the lukewarm efforts in recent years to give more flexibility toby rayon supervisors and farm managersa policy which was never systematically implemented, because of arbitrary intervention from higher levels.
From Khrushchev's point of view, the recent change does have the advantage of clearly defining the responsibility of the provincial Party boss for failure in agriculture. Many of these republic and oblast Party chiefs, however, are in the Central Committee and Presidium. If their opinions have any effect on the allocation decisions by the leadership, pressures may be generated to provide more resources for agriculture.
Khrushchev has often indicated his belief that the mostvariable in explaining lagging growth in agriculture is poor In answeruery by Cowies last April on what the problems were in agriculture, Khrushchev saidr
What do we lack then? The adequate training of ourhould say. Many of ourstill havenow-how for managing large-scaleonsequently, we are now faced chiefly with an organizational task.
He has harped on this theme3 and apparently feels that he can substitute good farm managers for additional material resources. In the effort to obtain quality in management, the number of enterprises in socialized agriculture has been reduced31 (machine tractor stations, kolkhozes, and sovkhozes). Presumably the most competent managers were retained, but at the same time the size of the farm increased, andesult whatever benefits were gained by raising the average quality of farm management probably were more than offsot by the large increase in the scale of the enterprise. 3 the average farm manager was responsibleectares andillion rubles of machinery, buildings, and other capital. l he was maintaining an average-size establishmentectaresapital stockillion rubles, an enterprise size that no other agricultural economy in the world has found to be efficient.
Agriculture remains the most intractable problem for Soviet economic policy. There are two clear directions in which Sovietorganization could move. The first direction is towardenterprises analogous to industrial enterprises. The steady
transformation of collectives into state farms Is in this direction, as Is the unification of the adoinistrative system (ino Include state and collective farmsnified command. Continued change in this direction would be ideologically sound andlogical. It wouldystematic application of accounting, wage controls, and performance incentives as now practiced in industry. There is no reason why it should be unworkable, but the cost in higher wages, added investment,uch larger administrative and planning apparatus would be very high. The other direction is represented by the essentially private agriculture in Poland aad Yugoslavia, where the state supplies only general guidance and allows prices to supply the resources for growth. The present system in the USSR i3 an uneasy compromise with which even the Soviet authorities are unsatisfied. At present, there Is no signrastic change either way, but thereteady drift toward the state enterprise form. It is suspected that this policy of slow change will continue to be accompanied by poorvacillation in allocation policy, and perhaps disagreements azoog the leaders.
E. Consumption
Although consumptionhare of GNP has beens and into the period of the Seven Year Plan, there have been significant gains in per capita consumption of food, soft goods, housing, consumer durables, and consumer services. Stalin's simple formula for consumption was replaced by one thatise inidening of choice. In Stalin's tiase, consumption not only wasow priority and the consumer treatedesidual claimant to national resources, but the range of choice was narrowed consistent with the criterion ofhealthy and alive" The planners, on perfectly rational grounds, wanted toow death rate, provide physical strength with cheap calories,the workers to work, and provide enough literacy to read blueprints and propaganda handouts.
The important trends in the consumption sector of the economy in the past few years have been asn enormous rise in disposable money income;ise in the proportion of new and higher quality consumer goods up9alling off of tho rate of improvementn apparent stagnation and possiblein the previous trend of substituting high-quality foodstuffs meat, milk, and tbe like in the diet for the starchy staplesrain products and potatoes; andonsiderable increase in leisure timeoncurrent but temporary increase in private building of houses. Estimates of averageincreases in the per capita consumption of various categories of consumer goods are given In
ollows on p.
Table 9
USSR; Average Annual Rates of Growth in Real Per Capita Consumption a/
Total consumption
Housing Soft goods Total food
Of which
base year for calculations ln each column is the yearstated year.
vegetables, meat, milk, fats and oils, sugar, and fish.
Some of the elements in the rise in disposable money income are as follows: oubling of pension payments5he adoptionlan for wage reform which would, ln tbe) raise wages in low categoriesoercent (and In middle categoriesoradual reduction in the income tax starting8 (nowb) the elimination of compulsory purchases of bondshe monetlzatlonood portion of rural Income that formerly had been paid in kind.
In tbe meantime the Soviet consumer wasigher and higher real income in the formider variety and higher level of consumer goods. In food, for example, the starchy-staple ratio (the proportion of total calories consumed from grain products and potatoes) fell from aboutoercent3 This ratio has anotheroints to fall before reachingpercent ratio of the affluent US, and the Soviet consumer wants thoseoints.
he consumerreak when tbe construction of private bousing was encouraged, tbe government even providingtrucking, and technical advice for this purpose. nvestment in new private bouses was double that6 and tbe share of private construction had risen fromercent of the totalin housing toercent. Apparently at some pointecision was made actively to discourage this un-Marx 1st activity. In any case, thereecline in private housing activityO-6I.ecree was issued forbidding the allocation of building lots
Higb-quallty food b/
and iasuonco of credit to individuals living in republic capitals and certain large cities. It is not clear whether thisew measure or merely public recognitione facto situation that has prevailedears.
The growing disparity9 between the rates of increase in money Income and the increase in real goods and services is the basis of Khrushchev's immediate problem with thc consumer. Khrushchev, at the1 Plenum in referring to the possibilityuture imbalance between the supply of goods and services and consumer purchasing power, bad called itituation fraught with dangerous consequences. In any case, inflationary pressures were clearly In evidence1 In the face of tbe regime's policy not to raise retail prices in state stores, the resulting pressures took the form of long waiting lists
goods offered for sale. As their basic wants have been more nearly satisfied, the Soviet consumers have demanded goods of higher quality and in greater varloty. Inventories of textiles, clothing, and shoes, particularly, have accumulated. In addition, tho rise In money incomes hasore than proportional increase in the demand for meat and other nonstaple foods. This growing consumer selectivity tends to concentrate demand in areas of consumer goods production wherehas been especially poor.
In the face of this Inflationary gap and the dim prospects for future acceleration of production for consumer purposes, tho Soviet leadership inas forced to take the distasteful and unpopular steps of raising meat and butter prices and rescinding port of thereduction in Income taxes. It Is probable, however, thatdisposable Income and the available supply of goods and services remain seriously out of balance at present price levels.
The consumer ln the USSR has made rapid strides and In Khrushchev hehampion, although one whose promisesenial expansiveness not matched by performance. The rate of improvement in consumption is slowing down because the sectors that supply the consumeragriculture, light industry, and tho construction industryre not maintaining their former puce.
P. Official Attitudes Toward Private Activity
The increasing complexity of the Soviet economy and the growing latitude for discussion and experimentation are both factors that bring
tbe question of private economic activity to tbe fore. In tbe post-Stalin era, there hasevealing ambivalence tovard private activity, probably caused by the conflict between the ideology ofplanning and the pragmatic desire for more output. This conflict stands out moat clearly in agriculture and housing, where the cost of insistlog on central planning and control reveals itself quite rapidly.
Private agriculture as now practiced in the USSR is almostmade up of "own enterprise" holdings of plots of landgarden size upcresand small holdings of livestock of urban households or rural households attached to socializedenterprises. Although fallinghare of the totaloutput because of tbe rapid rise in production in the socialized sectors, tbe absolute volume of output in the private sector continued to expand untild under the lenient attitude of the regime. The official policy, which hadore or less consistentsince Stalin's death, had been to reduce taxes and compulsoryquotas from the private sector. our note was added6egislative effort to reduce the size of the "own enterprise" of collective farmers, but Khrushchev assumed power inlank in his economic platform calling for the elimination of all compulsory deliveries from private plots. At this, the private sector was contributingoercent of the total gross agricultural output andoercent of livestock products.
8 the climate again changed for tbe worse, and there has sinceonstant erosion of the size of private holdings and the freedom to dispose of output. This situation hasoubleof directly retarding agricultural growth and probably reducing the incentive of the peasant to participate in collective farm activity as tbe price of having his "own enterprise." eduction in private activity was enforced not only on households attached to collective and state farms but also on nonfarm households in urban areas, especially on their holdings of livestock. 8 these urban plots held moreillion cattle and moreillion hogs and produced Ikof the national potato output.
7 the average collective farmer expended two-thirds of his total labor time on the collective farm but receivedf his total income from this source; one-third of his laboron his "own enterprise" brought himercent of his income. Labor productivity was about the same on both plots and collective farms in spite of much greater investment per worker on the Accordingly, from the national economic point of view, one of the most attractive features of private agricultural activity is that the state does not have to provide direct supplementary inputs of management, machinery, and farm supplies. If the regime is firm
a/a*v-'iW
"about givingow priority for resources, it should adopt tbe policy of "efficient neglect."
This apparently irrational streak in policy toward private activity also is illustrated in tbe field of housing. The growth as-
preceding section.* Tbe important economic consideration is that private individuals hadillingness toarge amount of labor into an activity greatly needed to improve tbe comfort and morale of tbe population. Even so, ideological considerationsractical worry about the leakage, of construction materials to this activity and the overhead costs of municipal utilities) overrode the economiceemingly irrational fashion.
At the very time that urban families were being given more
leisure by the reduction in the workweek, official policy wasproductive private activity in consumer welfare areasfood and housing. artian observer would have wondered why there was not an official effort to encourage private activity in order to relieve the strain on state-owned resources.
- See E,bove.
"
IV. Military Expenditures and Policy
A. Trends In Expenditures
5 the Soviet military establishment has undergone sweeping changes involving extensive reequipment with new arms and weapons systems, the developmentew doctrine for the nuclear age, and new organizational structures. During this period, Soviet long-range strike forces have risen from an insignificant to aelement providing for the firstignificant and growing intercontinental attack capability; Soviet air defense has beenwith the widespread deployment of surface-to-air missiles and has been acquiring fighter aircraft armed with missiles; tbe navy is being reequlpped with missile armament and now possesses nuclear-powered submarines; and major changes have taken place in the equipment and organization of the ground forces. Extensiveand testing is underway on newer offensive and defensive systems. Meanwhile, the Soviet space program has become an element of national power and policy.
The impact of these programs has fallen principally on the machinery and equipment sector of the economy. The cost ofand producing new military equipment, nuclear weapons systems, and space hardware and the requirement of these programs for the most critical skills and resources available have combined in recent years to increase significantly the share of the total Sovietand equipment production allocated to military (and space) uses.
After declining5he total militarygrew rapidly, reflecting the large expendituresdevelopment, and testing;he introduction of newsystems, especially missiles;he increased availability of nuclear warheads. The total military expenditures have increased by about one-thirdrom7 billion rubles (in market prices) to1 billion The rate of increase in military expenditures during this period was half again as large as for Soviet GNPhole.
Most of this increase was from the machinery sector of the economy. Duringeriod the machinery component ofexpenditures grew from aboutercent to aboutercent of the total,rend which is likely to continue into the future. Major demands have been placed on that part of thesector of the Soviet economy that supports the military For example, expenditures for the procurement of missiles.
Beginningtatement by Defense Minister Malinovskiy atarty Congress inl and continuing through muchoviet military leaders and writers have been discussing the theses of what is described as the Soviet military "doctrine" for the nuclear age. The content of this doctrine had been the source of obvious controversy and debate since an initial outline of viewB by Khrushchev in In the intervening period, Khrushcbev's initial formulations vere altered significantly, ln the direction of larger and more diversified military forces.
Inhrushchevelatively reassuringof the Soviet defense outlook. He argueduture war could be waged only with rocket-nuclear weapons but implied that Sovietpower would forestall their ever being used. Surprise attack waseasible policy, be said, because "sufficiently large" states would always be able to strike back. Conventional armaments, including surface ships and aircraft as well as large standing armies, had become or were rapidly becoming obsolete and hence could be dispensed with.
In contrast to Khrushchev's optimistic outlook, the doctrine enunciated by Malinovskiyomber estimate. While retaining Khrushchev's notionuture war would "Inevitably acquire the character of rocket-nuclearalinovskiy's doctrine refrained from softening this image with any of the compensating factors that Khrushchev had offered. In contrast to Khrushchev, Malinovskiythat plansurprise attack were being prepared by the imperialists; that "tbe main, the primary, and the most Importanttask of tbe arced forces is to be in constant readiness tourprise attack by thend that "final victory in war can only be achieved by tbe Joint action of all ares and services" andthe employment of "mass, multi-million-nan armies."
The major theses of the new Soviet military doctrine take Into accountomprehensive way tbe role of nuclear weapons andlend of both old and new ideas. The new doctrine holds that the initial periodhermonuclear war may determine the eventual outcome of the conflict. ar would be initiatedS (NATO) surprise attack on the USSR (Bloc). The primary mission of tbe Soviet arced forces is to frustrate such an attackreemptive blow against the means of nuclear weapons delivery. Soviet preemptive forces must be supplemented by air (PVO) and antiballistic missile (PRO) defenses as well as by passive defensive measures. "MultI-million-man" ground forces are required to carry the offensive into Western Europe, to seizeareas ln Eurasia, and to cope with the effects of the initial nuclear blow against tbe USSR. These forces ere and will continue to
be equipped with nuclear armed systemsass scale and will be provided with field defensive systems against both manned aircraft and missiles. Thevy must be prepared to combat Western seaborne strategic strike forces in the initial period with theof reducing the weight of the nuclear attack on the USSR ard then must support the advance of the Red Army by attacking Eurasian targets and by interdicting Western sea communications.
Since the ability to acquire and to maintain the requisite forces is heavily dependent on the size of the economic base, the doctrine stresses that continued priority must be given toof heavy industry ln general and of machine building in
The effect, if any, of the recent Cuban venture on Soviet views of military relationships and doctrine is as yet unclear. Whereas the outlines of the new doctrine seemed to be evolving with some clarity before the confrontation in Cuba, the unfavorableof that operation may generate pressures to reappraise or even modify aspects of the doctrine.
The signs within the Soviet leadership of controversy over the direction of military and economic policy during theears indicate that the choices have been neither simple nor clear-cut. The military element seems to have emergedarger share of resources than Khrushchev had ln mindnd itew doctrine which would seem to require continuing large allocations to military It is clear that this relative emphasis on the military can be continued only at the expense of other important economic goals.
C. Future Trerds
Whereas the results of theears of the Seven Year Planonsiderable over fulfillment In the goal forof industrial production, the lower rates of growth theears coupled with much more conservative official5 suggest that the diversion of machinery andfrom investment to military and space uses is having aeffect on industrial growth.
The probable trends in output of military hardware for many systems can be projected for the next year or two relativelyon the basis of direct evidence. The major areas ofare in programs whose major impact wouldr more years in the future. These include the antiballistic missile and space programs which probably are now in the advanced developmental stages but on which sufficient evidence is not yet available tolear projection of their future pace and scope.
If the new Soviet doctrine as expounded by Malinovskiy governs the future development of the military programs, it will have majorfor the general trend in the scale, composition, and cost of Soviet military programs over the next few years. It implies an almost inexhaustible demand for large and more advanced offensive and defensive systems of all kinds, particularly those capable of countering the very large Western strategic attack forces. These demands couldelatively large force of hardened second-generation ICBM's, development of an ICBM delivery system for the large-yield nuclear warheads testednd more advanced MRBM/IRBM systems. Heavy investment in active defenses against both the aircraft and the missile threat willecessary complement to the strategic strike forces. Tbe USSR also will seek ways to improve passive defensive measures for the population. The USSR continues to devote substantial resources not only to theof aircraft and missile defensive systems but alsoery large developmental effort in the antimissile field. Ultimate Soviet decisions on an antibellistic missile deployment program undoubtedly will reflect, on tbe one hand, Soviet assessment of the probabletimetable and technical effectiveness of antiballistic missile systems and, on the other, tbe interaction of strategic, economic, and political considerations.
It appears that Soviet ground forces will be maintained atlike present levels but with emphasis on reequipping them with more advanced weapons, including improved defenses against aircraft andmissiles as well as improved means of air mobility, reconnaissance, and control and communications. The Soviet navy will require aInvestment in submarines and new aircraft missile systems to combat Western seaborne strategic attack forces.
The impact of these military programs is accentuated by theof the space race. It appears that the Soviet leaders are committedontinuing space program as an element of national power and prestige. The Soviet space program, however, is competingfor the scarcest skills and resources which are needed also for the ICBM, aerospace defense, and economic investment programs.
A manned lunar landing program is by far the most ambitious and costly goal in space which the Soviet authorities are likely to pursue during the remainder of the decade. Itrogram which will require major new vehicle development and facility construction, will place the greatest demands on Soviet technology, and will accountargeof the total Soviet expenditures for space. Once committedchedule, little variation in the magnitude and paceunar program Is possible without major slippage and waste. The vehicles anddeveloped for the lunar program, however, probably will beto accomplishing most of the other major space missions which the
Soviet'authorities may wish to undertake, and the timing and magnitude of these other programs can be more flexible. The requirementsew large space booster also may be combined with thoseilitary vehicle for tbe large-yield nuclear weapons first tested
There Is good evidence that the rising military burden or. the economy has been the source of serious controversy within the Soviet leadership during theears. It is expected that furtherwill arise during the next few years if the present estimate of the force level implications and the attendant economic impact of the new doctrine are even approximately correct. The actual Sovietwill be conditioned by the interactionumber of internal and external factors. Much will depend on future trends in US advanced vea-
Bloc. Although the outcome of these various and conflicting pressures cannot be predicted with precision, the case for continuing strain is very good.
V. Foreign Trade tad Aid
General
It la estimated that the total Soviet foreign trade over the next several years will increase more rapidly than will GNP. This continued expansion of trade activity, perhapsateear, will be mainly accounted for by stepped-up economic relations with the European Satellites (the USSR's principal trading partners) and by increased trade with underdeveloped countries of the Free World. In line vlth the increased emphasis on Soviet Bloc economic relations, Soviet trade with Bloc countries (other than Communist China) isto increase byercent* aspercent increase for the total Soviet trade inear period. The present trend of new Soviet orders to countries of tbe industrial West for new capital equipment suggests that this trade will increase much lessthan in tbe past.
pproximatelyercent of Soviet foreign trade was with the European Satellites,ercent with Communist China and tbe Asian Satellites,ercent with tbe industrial West, andercent with underdeveloped countries of tbe Free World. Tbe volume of Slno-Soviet trade, which fellyear lows not expected to Increase significantly in vie- of continued Ideological differences between the two principal Communist powers.
uropean Satellites
There are two basic reasons forelatively rapid increase in Soviet-Satellite trade. First, plans for economicof the European Satellites5 callontinued high rate of growth in national income,ear. Second, the Satellites (other than Albania) and tbe USSR will form an increasingly closely knit economic community within the Council for Mutual Economic Assistance (CEMA) framework. Plans for more effective economic cooperation within the Soviet Bloc have been prepared in an effort to make tbe Satellites, aad the USSR as well, less dependent on trade with the Common Market countries.
The pattern of Satellite trade with tbe USSR will continue to be characterized, in broad terms, by the exchange of Soviet fuels and industrial and agricultural raw materials for Satellite machinery and equipment and foods. Tbe Satellites will remain beavily dependent on the USSR for supplies of petroleum, iron ore, manganese, nonferrous
heat, and cotton. Imports of Soviet agricultural products may be of increasing importance if Satellite agriculture continues to falter.
Industrial West
Soviet imports from tbe Industrial West include machinery and equipment of advanced technological design; ships; copper; andquantities of certain steel mill products, particularlylarge-diameter pipe. However, this trade, which grew at an annual averageillion during the, began to level offhen the increase was0 million.
Soviet exports, in payment for machinery and equipment,largely of petroleum and agricultural and forest; products, of which grain has been particularly important. argeof Soviet business placed in the last half0 and the first halfrders fell off sharply in the second halfI and have not revived as yet. It is possible that the falling off of new orders resultslanned phasing in the domestic investmentor from an unplanned indigestion resulting from the risingof uncompleted industrial construction. Western industrialstilley role, however, in Soviet plans toechnological "leap forward." Because of this and the increasing magnitude of debt repayment falling due to the West, it is estimatedontinued, but much more moderate, increase in trade between the USSR and the industrial West will take place.
and Aidnderdeveloped Countries
The growing Soviet presence in underdeveloped countries of the Free World was reflected inpercent increase in trade1 compared The largest single increase centered about Soviet-Cuban trade, which accounted for almost three-fourths of the increase. There were also substantial increases in trade with India, Indonesia, Iraq, Guinea, Mali, Egypt, and Malaya. Although Soviet trade with underdeveloped countries of the Free World is expected to continue its growth, the rate of expansionell sharply below that
Over the past year, there haveumber of significant shifts in the Soviet aid program in underdeveloped countries of the Free World. Most prominently, there hasharp drop inof economic aid, while extensions of military aid2 will reach an all-time highesult of the recent rapid growth in military shipments to Cuba. Furthermore, deliveries of military equipment2 also willew high, amounting to considerably
T
more thanillion dollars. There hasoncomitant dramatic expansion in the training of nationals from underdeveloped countriestbe USSR.
Thereumber of likely reasons that can be advanced for the increased Soviet emphasis on military assistance. First of all, itajor diplomatic tool for expanding influence in underdeveloped countries. This type of assistance exacerbates regional conflicts and tensions, which the Soviet leadership believes to be to its advantage. In addition, itong period of training and associationSoviet military officers and technicians and those of thecountry receiving aid. This opportunity to color thaand possibly to recruit members of the military elito could be of particular importance In those underdeveloped countries where there are practically no professional or business groups to influence the course of governmental development or philosophy.
Perhaps of prise importance Is the potential impact of Soviet military assistance to underdeveloped countries on the unity and co-hesiveness of the Western allied powers. The prospectolitically as well as economically United Europe has become not only more Imminent in recent months but also more formidable from the Soviet point of view for two reasons. The first is tbe UK's recently evidenced willingness to place ties with tbe six continental countries of the EuropeanCommunity ahead of existing ties with members of the Commonwealth and the European Free Trade Area, both of which were created by the UK. Participation by the UK willore potent European Community, economically and politically. Tbe second reason lies in the fact that Communist Parties all over the world are deeply divided into two groups: those who favor traditional, Stalinist policies end those neoclassiclsts of the Communist movement who support Khrushchev's revision of policies. The approach to Western unity could not comeore uncomfortable time for the Kremlin leaders, struggling as they areracture in their own Bloc's unity. Thus Moscow, while acting to reinforce the economic and political bonds existing In Eastern Europe, wouldpecial premium on any current development which might promote discord (divi-siveness) among the Western allies. If the provision of arms tocould so exacerbate the Western allies, Moscow undoubtedly would consider tbe rewards ample to cover Its costs, and if the permanent installation of medium-range missiles on the island of Cuba could make the US Impotent in the world arena, economic calculations would beirrelevant.
harp distinction was drawn between the impact of Soviet military assistance and economic aid to underdeveloped countries. Arms and aircraft furnished were largely obsolescent, drawn fromstocks, and therefore did notiversion of resources
away from current production of either capital goods or military During the past year, however, most equipment furnished has been identical with material that the USSR is manufacturing for its own armed forces. This is true of thend the surface-to-air, surface-to-surface, and air-to-air missiles supplied to Egypt, Indonesia, and Cuba. This statement also applies to the Komer-class motorboats and tbe electronic equipment, tanks, and other arms that were part of the aid to Castro which began arriving during Hence the drain on Soviet materials, machine building capacity, and technical skills per ruble of military equipment delivered is much closer to that of economic goods than before.
In summary, given the present opportunities, the Sovietappears to have decided thatreater return onaid than economic aid, and if this Judgment is correct, the trend of new commitments should make this change clearer3 and. This Is not to say that the old program will cease to have an economic aide; indeed, as ofhere were substantial offers of Soviet aid outstanding that had not been accepted by the underdeveloped countries. The USSR can be expected to use both military and economic assistance when it promises to preempt or materially erode other foreign influenceountry of strategic importance or to create dissension among the "Western powers.
Unless the USSR meets with serious rebuff or loss of influenceesult of its trade and aid program, it can be expected to make use of its capabilities when exploitable soft spots appear in theworld. Furthermore, although they defy quantitativethe striking growth of Soviet prestige and influence in Asia and Africa over theears Is undeniable. In short, as long asare presented for expanding Communist influence and powerorldwide basis, tbe USSR will continue to assign high priority to allocating its economic resources ln this direction, regardless of abort-run stresses and strains ln the domestic economy.
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NNb-
VI. Outlook
A. Problems and Responses
Tbe recent rates of growth of the Soviet economy probably will not be acceptable to tbe Soviet leaders for very long. Theirwith agricultural performance has been plainly stated, even though it has not been reflected, in concrete measures. Tbe recent rate of growth ln industryercent is clearly below expectations and long-run goals. This suggests that some very difficult allocation choices have yet to be made or are being made now. Choices must be rade on the one hand between current consumption, investment, and(including space) and on the other hand between investment In consumer sectors and Investment in basic Industry. Furthermore, within defense and space, bard choices must be made among various alternative and competing programs.
The reduced rate of growth has come very inopportunely attime as rising new demands by tbe military and spacethe slowdown was ln large part caused by military demands. the excess of commitments over capacity can beto Khrushchev's chronic overoptinlsaolicymaker. were overly optimistic In three major problem areas. apparently nistook tbeperformance
ermanent gain in agricultural efficiency. Second, in industry be expected gains ln efficiency from7 reorganization that have materialized, if anything, as slight losses. Tbe large increases ln productivity scheduled ln tbe Seven Yeartrongly suggest great expectations of success from tbe program for new technology. The decision9 to proceed with tbe adoption of tbe kl-hour workweek is further evidence of these expectations. Third, be apparentlythe cost of the military and space programs. This nay haveombination of underestimating unit costs, underestimating the size and number of weapons programs that would be needed, and perhaps underestimating the resistance of some military leaderseduction in conventional forces. Khrushchev's speech ln0 clearly indicated his belief that missile programs shoulday of reducing resources used by tbe military, not Increasing them. Intbe doctrine enunciated ln1 by Marshal Malinovskiy emphasized balanced forces, including multi-ml11ion-man ground forces.
It is characteristically Khrushchevian to respond to economic difficulties by reorganizing administrative structures. His first major divergence from tbe consensus of the collective leadership was the proposal for reorganization of industryhich led to the
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anti-Party tight. Khrushchev has engineered major or ainor reshuf flings of tbe adnini strati on in industry or agriculture in nearly every year In2 at the Plenum of the Communist Party of the Soviet Union, he proposed yet another shakeup of both industrial and. agricultural organizationeorganization of the Party.
These proposals by Khrushchev arereliminary outline with many loose ends and details yet to be resolved. The central motifs are perhaps three:
A strengthening of control by settingoint Party-state control agency with the intent of reducing the illegalities, falsification, and speculation that have plagued both industry and agriculture for the last few years;
A bitter denunciation of bureaucratic riglditiea and shortsightedness in Gosplan, especially the preference for increasing production of steel Instead ofhis wrongdoing to be redressed by transferring some of Gosplan's powers to state committees for various brancaes of industry and perhaps by Increased monitoring of plans
by the newly established Party Industry bureaus andand
3- eneral effort to increase Party participation in economic management by establishing separate industry and agricultural Party committees at oblast levels and industry and agriculture bureaus at higher levels of the Party.
It ia clear, however, that the proposals do not pointorrection of the difficulties In administration that have been most complained about in the Soviet press for theears. Enterprise managers and otter local officials have written, in lurid terms, of administrative confusion and waste arising from duplicating or unclear lines of authority; of multiple and uncoordinated plans descending on the enterprise from all-union, republic, or sovnarkhoz levels; and of gross inconsistencies between production and materials supply plans. The encouragement of administrative intervention by Party committees inherent in the new proposal Is more likely to confuse lines offurther than to clarify them.
Neither did Khrushchev's proposals settle tbe question of enterprise bonuses and incentives about which economists and managers have beenively press debate. Khrushchev gavemall nod of encouragement to the celebrated Liberaan proposal to make
S7/SV- Stt v
enterprise management bonuses proportional to profitability as opposed to bonuses for fulfillment of output plans.
It is possible that some modification of Liberman's proposal may be adopted. The potential benefits (for efficiency) of profit maximization, however, would surely be largely frustrated by the vigorous and arbitrary intervention ln management by tbe Partyto be set up under Khrushchev's proposals. Profit maximization and price reform as advocated by Liberman and his supporters edge totteringly close to Oskar Lange's "market socialism." There is no sign of the kind of ideological upheaval in the minds of Soviet leaders that acceptance of this approach to economic control would require.
Neither this reorganization nor any other likely to succeed it will significantly raise tbe growth capability of the Soviet economy. The problem for the leadership is to allocate tbe resources given by this capability. Tbe growth performance of the last few years suggests, approximately,ercent annual growth ln industry will require at least asrowth in inputs asa moderate growth ln labor forceercent per year) andpercent growth in capital stock. Agriculture appears torowth in capital stock and other industrial Inputs substantially greater than tbe output growth desired. Recent experience indicates that these Inputs cannot be made available simultaneously withrowth in arms and space expenditures and weapons production. esumptionate of growth of GNP ofercent and of industryercent, it seems likely that military and space expenditures must be, atonstant share of GNP andeclining share and that arms and space equipment must be, atonstant share of total machinery output. ontinuing relative rise ln military effort could be combinedeacceleration of industrial growth only ifand investment in agriculture, bousing, and light Industry are restrained to very slow rates of growth.
The pattern of allocation of resources that2 and is tentatively indicated3 shows evidences of being makeshift and temporary. This pattern appears to includeeveling off of tbe previous rise in consumerontinuing relative increase in expenditures for defense and spacethis is very uncertainontinuation of tbe recent slow growth in investmentwith investment in housingand investment in light and food industries declining;) some increase in investment in agriculture but an apparentto make firm commitments for tbe large investments required to raise farm output significantly.
B. Prospects
The current pattern of development of the economy probably is not entirely to tne liking of any of tbe top civilian leaders. All will be looking for ways to channel more resources intogrowth. Recent interviews have established that Khrushchev has not given up bis desire to Increase substantially the resources allocated to agriculture. Other leaders may not share Khrushchev's enthusiasm for agricultural development, but all will recognize tbe penalties in prestige abroad and morale at home that could stemontinuing stagnation of production of food. The mediocre farm performance2 and the serious riots that accompanied tbein neat prices will sharpen this feeling.
In the defense and space field, there are an indefiniteof programs that can be advanced to serve some strategic oror propaganda objective. The leadership has to sort out these competing demands to fit its immediate strategic plans and problems. In this respect, military demand is relatively short run. Inrapid economic growthin particular, catching up with tbe USundamental long-run policy of tbe Party leaders that they probably will not sacrifice for long except for clear and present strategic objectives.
Perhaps tbe leaders will agree that the rapid rise In military expenditures at the expense of economic growth is or should be In this event, military expenditures will again scon come under close scrutiny. In particular, some reduction in the number of men ln service seems feasible. Some conventional weapons and perhaps even some misBile programs are possible candidates for cutbacks. Even so, with potentially very costly programs in tbe offing, such as the development of an antlballistlc missile and the landingan on the moon, restraining defense expenditures will be difficult. Judging by recent experience, the Soviet leaders may well be unable tolear decision in favor of one objective at tbe expense of all others, as Stalin might have done, but Instead will make marginal decisions, slowing down some programs, speeding up others, and introducing selected new programs.
A major factor Influencing tbe decisions regarding defense and space will be US expenditures in this field. Tbe Soviet leaders will be torn between tbe strong incentive (and the pressure from military advisers) to keep up with tbe US in these fields and tbe increasing awareness that the ansa and space races are penalizing Soviet growth much more severely than US growth.
z>
Table 11
USSR: Indexes of Resource Productivity in Industry SelectedO-6I,5 Plan
1
Plan n/
lodCX
U'i.0
of length of workweek
8
of MA-bouri worked
of capital eervlcca
U
t.L
of "predicted" growth b/
of actual grovth (ORB)
of Grovth over
Period Accounted for by Crovth in Input*
8
6ft.5
c/
d/
growth, by periods {CM)
growth, by periods (index
"predicted* growth, above)
a
growth cot accounted for by
lo inputs
re baaed on tne Indicated official plan (orlBloal) Tot cmtlny-icnt, capital stcck,roduction, itc ln3e>5 la based on the assunptlon that tho length of the workweek willreduced by an additional hour2 Thoplan la used Id oooputatlone It is believed that the plan neosuro (gross volus of output) is slnUsr In concept end covsrags toIndex snd doss not reflect the ueusl biases believed to be present ln the official index of actual Industrial growth.
Indexeasure of tho level of output expected to be obtained froa the Indicated levels of "conventional" Inputs of laborbove).
e. 5
d. IM bane year for calculations lo each eoluao la the year before the stated year.
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IMH4
Table 12
USSR: Indexes of Industrial Production, by Branch of Industry
I
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Original document.
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