THE RECENT RECORD IN SOVIET ECONOMIC GROWTH: INDUSTRIAL PRODUCTION IN THE USSR

Created: 10/5/1962

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I.

XI- Soviet Industrial Production0 to

Trends In Civilian Industrial Production

Industrial

Reasons for tbe Recent Retardation in

Indus trial

III. omparison with Western

17. CosrpariBon with Other Indexes of Soviet Industrial

V. Future Prospecta for Industrial Orowth In the

Appendixes

Appendix A. Description of the

I. Sources of Data end Coverage of

n.

III. Deficiencies of the. .

Appandix B- Cooparioon of Calculated Machinery Output With

Soviet Announced Investment in

Appendix C Tableata for Chartactors in Soviet Industrial

ill

Page

of Soviet Industrial

6

Average Annual Growth of Industrial 9

Three Indexes of Soviet Civilian Industrial Production,

16

Bzulnuart Portion of Official Soviet Investaent Index frxnpared to Calculated Civilian Machinery Index, With and WithoutbillIons5 rubles) . 31

5. Data for Chartactors in Soviet Industrial 33

Cherts

Following Page

Chart 1. Indexes of Soviet Industrial 3

Chart 2. Factors in Soviet Industrial 5

5i;

IHDUSTIUAL PRQDUCTIOH IW THE USSR Rush V. Qreenslade and Phyllis Wallucr

I. Introduction

Industry Is the highest priority producing sector In the Soviet economy. Indeed, industrial production la noteans to other ends as in any economy but io on end in Itself. The continuing rapid growth of Industryolitical requirement in the Soviet Union exceeded In Importance only by military preparedness. The best trained and highest quality manpower as wellarge and rapidly growing share of investment are annually directed into Industry and in particular Into heavy Industry whose principal end productsrmaments,achinery and construction oe to rials for more investment and more Industrial capacity. Under these conditions it is not surprising that Industrial capacity and production have grown rapidly.

The purpose of this paper is twofold: (l) to present an independently constructed Index of civilian (non-armaments) Industrial production for the USSR for the0o consider possible trends and recent developments in over-all industrial productloa. Including armaments. In an effort to make the civilian index as representative of postwar production as possible, the sample of physical products, whose production is regularly annoiKced by the Soviet government, has been supplemented by estimated production seriesumber of new and rapidly growing products. The most important of these ere electronics production, civil aircraft, and merchant ship

A nunber of other possibly fast growing products are emitted for lack of data. On thle account the calculated Index may still somewhat understate actual growth of civilian Industrial production. ore detailed description and evaluation of the index can be found In the appendix to the paper. II. Soviet Industrial Production0I

A. Recent Trends in Civilian Industrial Production

Civilian industrial production in tbe USSR has grown rapidly in tbe0ut the growth has slowed somewhat5 and especially0I. According to the calculated index the average annual growth051 percent,5ercent and0ercent. The index and its components are shown Innd Chart 1.

Both industrial materials and consumers noc-durable goods show fairly rapid rates of growth durings followedoderate slowing down0I. for industrial materials the average annual growth0 percent09ercent9 Tbe growth rates for consumer non-durable goods for the sane periodsercentercent. In civilian machinery production the retardation starts abruptly8 and is more pronounced than In the other two cceipooents. Civilian machinery maintained an average rate of growth4 percent2utercent.

B. Over-all Industrial Production

Tbe addition of arms production to civilian industrial production would surely modify the calculated trends. In the absence of sreaaents production data the degree of slowdown in over-all Soviet industrial production is uncertain, but we do not believe its inclusion would eliminate the slowdown. The Soviet official index, shown innd Charthich presuanbly includes armaments production,light slowdown0I.

The growth of armaments cannot be estimated with confidence, but some speculations are in order. The general shape of the trend in armaments and tho key dates In Soviet military procurement policy can be readily guessed at. It is of special interest that tbe armaments production trend appears to have different turning points than those In the trend of civilian production. The useful statistics for this purpose are civilian machinery production, excluding electronics, and metals production (Greenslade-Wallace Indexes). These are shown on Chart/

The impact of armaments production is clearly visible in the Korean War period. While netals production rose steadilyivilian machinery stayed constant. Civilian machineryapid growth3 which continued ivilian machinery grew even more slowly than metsls production. By analogy with the Korean War period, the evidence7 suggests an acceleration of arms production. The general shape of an arms production index can be described as follows: apid growth

-

0lat or slowly growing trendcceleration We cannot say what cuantltlee to substitute for the words rapid, slow, and accelerate but any of several reasonable guesoes have the saoe modifying effect on civilian production trendsthat la, to increase the growth trend, to slow it down. and perhaps to Increase it Hence retardation In industrial growth say have occurred2 and again An Illustrative trend In over-all Industrial production thus might be; , an annual average growth ofercent;n thisontinuation of the postwar recovery surge and the recent slowing down occurred primarily0I.

C Possible Reasons for the Recent Retardation In Industrial Orowth

Two factors stand out as possible causes of the recent retardation: . -first, the reduction of tbe scheduled workweek, and the trend of labor supply generally; second, the slowing down of Investmentesult of an increase of military production. The trend of man-hours

For the over-all Index to be rnlsed free 6rTpercent nnnnniiy to fl percent0I wouldon-electronics armaments growth ofercent annually. To raise itercent, and eliminate retardation entirely would require armaments growth ofercent annually. The latter figure seems unreasonably high. It would surely havereater effect on the rest of the economy than we observe.

worked in industry Is shown onlong with Investment in Industry.The trend in industrial Investment showslight slowing down, mainlyt appears that the Increase in arms production has come chiefly at the expense of investment In sectors other than Industry. Shortfalls in industrial investment0 may have hod some retarding effect on productionnvestment1 would have Its effect on inly

The trend in man-hours, in contrast,arked flattening outhich is, of course, closely related to the progressive Introduction of the short week7 The flattening of growth of man-hours worked surely has had some retarding effect on output. Very possibly, however, this effect was pootponed0Iesult of tbe scheduling policy in the Introduction of the short workweek. 69 each enterprise was Instructed to introduce the short week if it could do so without increasing Its labor force and without reducing output below plan. Those enterprises that did Introduce the shorter weekresumably had at hand known labor-saving opportunities. Taking advantage of these opportunitiesiven year means not having them in later years. 0 all Industrial enterprises shifted to the short workweek, ready or not. The Soviet press testifies to the fact that many of these enterprises were forced toe workers. The industrial statistics ineveal at least one industry that

ee Appendix C.

Indexes of Soviet

alue-Added Heights 0 1

Calculated index

terifil3

pover

products S> natural gas-

metals <

metals

products

products

materials

=acbinerv

excl. cloctronles

nondurablca Roods

goods

food

civilian Industrial production;

Official Soviet Index of the groB3 value of Industrial production

54

70

O ^

63

rop in output attributable to tbe reduced workuevk. The timber Industry, operating in distant and unattractiveas always had trouble maintaining its labor force in spite of prcmius wages. The introduction of the ill-hour week simply resultedd percent drop in output of forest products9

A third factor which nay have had some retarding effect on civilian machinery production Is the effort to introduce greater diversificatlon in product lines. Introduction of new technology in industrial production processes hasital part of industrial growth in the Soviet Union. But final products have usually consistedimited nuobor of standard models. Product differentiation and diversification have never been strong points of Soviet industry outside of high priority fields such ss armaments. In this respect the emphasis of the seven year plan on new technology along with the bonuses for its introduction may have led sees enterprise managers down unfamiliar and unproductive paths. Difficulties in designing and tooling upider model range have been reported in agricultural equipment production especially, and It is possible that these difficulties are In part responsible for the decline in output of agricultural equipment7

It seems likely that competition from military demauo contributed to difficulties in the introduction of new types of civilian equipment as well as in other aspects of neu technology for civilian purposes. In this connection

armaments should be thought of as Including atomic energy activity and space pro gran3. Space, and nuclear weapons and missiles, in this country as well as in the USSR, haveuality aspect into the competition for resources that may be as important as the quantitative aspect. It ib characteristic of recent trends in weapons systems end space programs that the research, development, and testing programs have become anarge port of cost. Ware important, tbe resources required for those programs are specialized and scarcevery high grade scientific, engineering,-and technical manpower are required along with special alloys and chemicals, low tolerances, high performance, and in many cases handmade components. Each rocket test firing wipesleaming and outrageously expensive package of hardware. Tho high grade resources are Just those most needed for the Soviet plans for new technology (labor saving and capital saving) in both Industry and agriculture. 7JX. osBjarison with Western Countries.

ompares industrial growth for the USSR, US, Japan, Federal Republic of Germany, France, and Italy.

The most startling numbers inre those for postwar Japan. Its recent rote of grewth not only far exceeds that of any European countries, but also that of the USSR8 In the rapid surge of tbe first two five-year plans Soviet civilian Industry2 percent annually according to Butter hj6 percent according to Kaplan and tfoorsteon. Tho growth

*/ TheIndustrial I'rocuction in the Soviet union, G. Warren Butter,

"

%J IndexesIndustrial Output, Itorman M. Kaplan and Richard 0.

.

a

Average Annual Growth of Industrial Production

Percent

Period

a/

Republic of Germany b/

b/

mm mmJ

b/

I

c/

/

1/

e/

e/

e/

"- g^StatiBtlcalI and Jnpanooe Economic Statistic a,

OEEC, Industrialnd OECO,

year Initial

Of Soviet industry in the postwar period is about the sane as that of Germany and Italy, greater than that of France, and considerably greater than that of the US.

Caution Is desirable in drawing conclusions froa short periods of growth, particularly In countrieo recovering from wartime destruction. Therefore, average annual growth since prewar Is shown for each of the countries. For this purpose we have linked our calculated index for the USSRo tho Kuplan-Woorateen Index of civilian output.

In capability for making industry grow, the USSR must be given high narks.

ty

*.r; *ci terf^fc Sv,v-

aI'*i wy^aryhu*

bfe* ttSSa'e ii ^jwii-i.i'v*ol^iton iiaa thai to* iWawo* in Utt Vastor*ttfttttlMwi, Qact Oaattp, lt*2y, andear) <Sef*x^ Un-den mnlln carryingheir Finally,noted tactS and Franca had a

great deal ofloyed laborin tfc* prewar bus* ymxm.

The DM givnjk rates Saonat civilian iadustrial produotiou. Before drs-ing fiaji cacc^uiuia about interunticvnl casparlsooa la the feeble ve taut considerpossttlt atfect of nansiTati-on thendustrialrotas.

Chtrapnear to Vi anyapproael: to military nroeurewmt than that develoi-Bd by Professor AVonn his studies of Soviet national mmenw. Poreoatus-Vjrtti.iiy to arrive at

- - iS.ui par* .vel nay ana

r '" ' ac^ir-ad>ad war " . ,Innact of dovlat

r -cntoAbuteiotal USW iuvfr"vvmt Sa the fens* 'Jeatara oowrtrlM end

c L o' ^oiianiast

air pcrici ha- 'wos

he grnovocan.bud-jet. Uncertainties about nomhtx of awn in se*-vics. their average pay, and prices paid for subsistence goodso mukerecarious operation. In addition, the announced defense budget la itself under suspicion. There are reasons for believing that activities sucb as military research, development, and testing, and perhaps even sane part of arnuueenta procurement are financed from other parts of the budget. These kinds of activities have certainly been growing rapidly0 as defeneo weapons policy has shifted more and more to nuclear weapons and elssilc aysteats.hile this increases the uncertainty. It suggests that Bergson'a method leadsonservative estimate of the growth of armaments.

Bergson explicitly estimates muaitions procurementOnd the estimate can be extended back7 Co obtain an index ofor tbe7kV/ This over-ell growth is already greater than the estimated civilian production growthercent for tbe entire7

These calculations strongly suggest that the growth of armaments production71 exceeded the growth of civilian Industrial production end that

"VJ7 In this natter we fellow tbe,argument in The Clsia of the Soviet Military Establlshnect on Economic Resources, by John G. Oodaire. paper contributed to

u-ffi,

ergson's estimate of total procurement7 is divided betweenother procurement by0 ratio of the two. See Dergsoo,

11/ The Kaplar,-Moors teen index0 tines the Creentlnde-Oallace Index0 *

ioi&as measure of Scvlet industrial growth, and finally

f the Wcscern European and Japanese posi-wsr industrial recoveries have bean lnpvccs've, that of the USSR has beeo no less so.

meu smaller estimate or Ooviet ansaments production growth75 has been calculated by Professor G. Warren Nutter. See Butter,hisppears toerious understatement. In the first place, we can be reasonably sure that tbe stock of armaments has grown faster than number of men la tbe iimed forces over thia period. The trend toward increasing firepoweruip-sent per man seems incontestable. The annual flow of armaments production would also increase faster than number of men, as long as there -Is no unusual contraction in the terminal period.

The number of men in the Soviet armed forces7 was approximately

as follows In millions;

$ w

See Hergson,.

An index of military manpower75 is considerably slower than Bergson's carefully calculated munitions index. The manpower index, BergBOn'i munition index, end Nutter's military products index are as follows:

Bcrgson,

Kutter, military

Nuttestimate, implying that armiacats production per man fell drastically70 and7 toseems to us implausible. Ruttcr's calculations Involve dividing the defense budget in current rubles Into pay and oubaistence and procurement, and then dividing procurement Into military products and "all other". 7ccording to Nutter's calcuhtlons military products rise (in current rubles)ercent and "all other"fold, fromercent of all procurement toercent. 05 "all other" is held constant by Butter and military products rise rapidly fromercent of all procurement to 5fc percent. Tbe rationale of these diverse shifts escapes us. Even though Butters treed of armaments for the whole75 is too lov, the trend05 appears to us too highor the exceptionally low index

industriale, however. Iseasure of industrial efficiency or of efficiency in promoting growth, much Jens of the effectiveness of an economic system. Where efficiency is in question the industrial performance must, be related to costost in terms of the opportunities foregone in other parts of aspects of tbe economy and in terms of the cost of inputs into Industry. He are already familiar with the coot to Russian consumers of the tremendous ccoounlet emphasis on industrial In vestment and growth'. Careful comparative studios of relative efficiency of Industrial growth as between various countries at various levels of technology have yet to be made. In this paper our concern is only with Industrial growth from the point of view of its strategic Implications for the US over the longV. Ccnpnrlson with Other Indexes of Soviet, Industrial Production

Precisely what has been the postwar growth of Soviet Industrial production Isontroversial matter in spite of substantial efforts by Western economists. The index of gross vulue of Industrial production published by the

3^/ atter of general interest we can calculate absolute increases of industry In the US and USSR. This calculation must consider the divergence in Western estimates of tbe relative size of US and USSR industry in any base year. To main estloatoa have been published. Tee cutlmate of Butter is that USSR industry equalsercent of that US above) See Butter,. Mr. Allen Dulles' estimate implies that USSR Industryf US If Dullea is correct, tbe Soviet absolute increase5I wasUS5) and the increase in US industry over tbe same period If Nutter is correct, the Soviet Increase wasgainst tho IS increase Bearings before the Joint Economic Committee CongrCBS of the Haltedjtatement of Allen v. Dulles, p. 1-

Is

USSR Itself is Dot accepted by Vesttn* students as as accurate measure of industrial growth. The specific fault, of the Soviet gross value index lirge and probably varying diiublucountlug, excessive pricing of new products, inclusion of non-productive activity smh as capital repairhave been exhaustively analyzed by many Western writers and need not be rebearsed here, lj* But perhaps the most important consideration is the inflated reporting arising froe the tremendous political pressure ana financial incentives-operating at all levels of the industrial hierarchy to sake tbe gross value Index for each plant, each region, each industry, and the economyhole rise in excess of plan.

Two comprehensive indexes of Soviet industrial growth have boon constructed recently; one by Norman Kaplan and Richard Hoorsteenerminal yearhe other byarren ButterS for the prewar period these exhaustive and careful studies give results which are substantially in agreement for civilian industrial production and there is small likelihood that they could be aucb improved on with present data* For the postwar period, however, there are considerable doubts about the representativeness of th? sample ofsed in the two indexes.

The postwar period bothS and the USSR has boon one of rapid introduction of now products andrapid development of lew industries. In

IE7 See Francis Seton in Soviet di'u.-ies,p.

Ik

irevisions nfu industries luid products ruive been intpf-ilo-iy covered. Id the Jis* of conmrdl'Lcs for which the Soviete#>M* pmductlon dsta peu products are usually aoong the missing. Tho COUSVIoiibprinclpnlly out not entirely is tbe coverage of machinery and equipment production. Kaplan and toorsteen commented on their postwar Index in tna :'ol'owing words:

"With the beginning ofa, however, the level ofoo In Soviet nachinebulldlng rose rapidly. The number it models proliferated and changed frequently. Thus, the machinery index la believed significantly to understate the actual increase is output0 Oft.'

The principal difference between the calculated Index in this paper snd other We, era constructed indexes of Soviet industrial output Is the Inclusion in the foioer of estimates for new industries ana products, especially electronicsvil aircraft, andships. Military purchases of merchant

fit.ips and. tveasport aircraft are excluded (for lack ofut thei-ff for ilU Jther industrial are comprehensive and include production

ilitary a* well at civilian US*, /nportanl examples of dual useutoaobllen,nd cluctmnics. Since armaments productloa anmitted, ito-cvor, the calculated index is referred to as an index

ofit induct rloJ product Loo i

!>/ Jju'. . covej, p

Table 3

Three Indexes of Soviet Civilian Industrial0

Greens

I. Industrial Materials

Ferrous a/

nonferrous b/

Fuel and electricity "

Electricity

Fuels

Chemicals (including paper)

Chraicnlft c/

Forest

Construction note rials (lncl.

Construction

Forest

Umber, wood, and paper

II- Civilian Machinery <excluding consumers durables J

(excludingand

l- [Transport eouipnwnt e/ ^tJjM^ IAgricultural machinery t] [Miscellaneous cnchlnery vj Added sectors

Electronics h/ (excl.

CiTlllan

Civilian

Ccnsuaer

and allied7

Textile and allied

COMUmer durableeel. radr.o

=no TV)

Total Civilian Industrial

1

1

' iiU-iraxlf <roo, stent 'Clots'

i,ot I- the

nyor.Dci.1'; :'tt"** A* Gives*ace tads* but

?wo outer'sf ebMsicalaw-ller Ibou inther two indexes.

1. ?or rh? Gr^-naii-de-Wallace teaex, lumber, vooqaper, which art- porths ^receding category, are shown againrder to match tlw differentoi' thelodex.

wA-yiee Includes airtomotlve and railroad equipment.

rK?tor&gricultural eqaipneot.

liix^ioHl,aivl petroleumc Natter Ttuf the iMcsryfrom prices and Productiontp Oovlet anion IQPfi-igSq, Richard Moors tear:.proas,,.

-rf^tliand television sets inew electronic itensruchlnery-bleriy telephones and suitchboorde.

1. Nutter omits televisionery important and fast growing product in the consumer durable category.

vrr tfnatcrn ioie/.pat-fn of Industrysnlul byr* iatwidad ic. appi'oxloai*addad.

coupar'son of ourith the Butter and Kaplan-Moorstccn indexese presented in Table J. Tba atost Important differences;ov?rage between the three indexes are noted in tbe footnotes tobe rate of growth of our index exceeds the rates for both th- Sutteroorsteen indexes for tbe- The ccesparison intar.es clear that the largest purt of the difference between our index and tbe Other two is accounted for by added coverage of ours. In particular the widest divergence is in the machinery sector, and this divergence stems primarily from the addition of electronics, civil aircraft, and shipbuilding to our Index, lb/ Tbe divergence of our index from Butter's stems also in partignificant difference in weights for the major co:tors. Butter's weight for nacblnery ispercent whereas our weight for machinery excluding electronics5 percent. Nutter does not reduce the machinery weight to exclude arms production and applies this large weight to his very slow-moving machinery index.

la spile of *b" nroader coverage the present index grows only a. little fatter than The Xaplon-Moorsteeo index ineriod industrial oareriala androia account for about OO percent ci" teen botn indexes, voile the principal divergence of coeipooent indexess Ikeector. *twapt expectr-ali rl rill an

A cooipariton""TThe"atedan oaohlncry index with the Index of then*Invriaent ;mr.ouaced byno Sovif 'cwmmntiven ini

indexes to diverge seriously. 5 tothe two Indexesittle further. 8 the Kaplan-(too ro teen indexercent5 for on average annual growthercent; our index1 percent annually. The Kaplan-Moorsteen index is weighted0 prices, the Greenalade-Wallace index5 prices. One would expect early year prices to result in somewhat faster growth than later year prices, for an Identical sample, because of the general tendency of relatively large price declines to be associated with fast-growing items. However, the broader coverage of faster growing items in the Greenslade-Wallace index more than offsets this price factor.

Finally, we take note of the' over-ell industrial index including armaments computed by Butter. This index is compounded from Butter's civilian index which6 percent5 compared0ilitary products index. The over-all index" percent per year. This may be very close to the mark as an over-all index of Soviet industrial production in this period. We believe, however, that Butter's index seriously understates the growth of civilian industrial production and overstates the growth of ornaments production and henceisleading picture of the structure of Industrial growth in this

V. Future Prospects for Industrial Growth in the USSR

The uncertainty about the rate of over-all industrial production for the pas

1J/ See

feuaxes forecasting all toe more haz-ardonr.. Certain generBllred conclusions, however, are suggested hy therends over the past decade.

The loss In industrial growth attributable to theworkweek is presumably con-recurring. The Soviet government has promised an additional reduction of one hour on Saturdaysnd gradual reductionhour workweek beginninga. Whether the one hour reduction has actually been carried out is not yet known. However, any further substantial reduction of the workweek wouldesounding victory of Ideology over ecwson sense. Assuming there is no further reduction we canesumption of growth of raanhours worked In industry, and on this account sonic rfacceleration of grcvth as compared0 Bottleneck probleM ario'ng from excess Inventory accumulation or specific coaKOlity widerfulfillnents may have contributed to the slowdownI. These are susceptible to vigorous ad hoc administrative corrective action and on this account also industrial growth? nay be IncreasedI.

A reaccelerotion of growth ovor the longer run appears to be closely dependent on allocation decisions yet to be made. 2erceat average annual growth rata wus made possiblerogressive diversion of resources from military growth to civilian uses and especially to industrial Investment. The number of ceo in the armed forces was substantially reduced and

BO

ars-^er-ts pzefhtsblarj fceani '> tllFi:iffylt. StMO*

s-. . . iiuu

to tfce vdUtk^ wau^n

requireV . . itoor ia.it inyj.iA Jjv.'JiiYi

as it is bom ocomtrtaA,troOixSorjx-.tttt*,

dlversifica'ciou, and quality.

If the Soviat lev cJiueyu oo cou^SEKS it*ettnewnd encoaafcoirti Jj. fcjoor three yeas,eo YlWi<.i x-e spta of pa.Industrialtl-i'o aIn .'*

of industrialiiblstf ol teah Si, inll.l ooapaUadthea^-loultura

housing,and tana* -atMUWUhtve totx ;ore esveiely rcst-tincd.

I. Sovree* of iJaia end Coverage oi' saimle

BW basic eaurcea oi* data axe physical outputs oxd prices, of cnuaod-ities givenuecesaioo of Soviet statistical Limited spacelscansion of these data here. escription of these stetiot'.en esn bo fenmd cither In Ken Ira sad Mooroteen or In tfwttor-

For the Index calculated In this paper these basic statistics have boon extended or disaggregated on the basisariety of information In Soviet economic and technical literature. The following outline summar-isos the major additions or nodittcntione to the aanooncad physicalsample, vhlch are trmlndnd In the present calculated index and In meet cmsas vara not fnclunsd In either the Nutteren-Mocxoteen indexes.

fibers and plastic resins. Production data forhave been regularly reported, tut for the latter have Justreleased by the Soviets.

cwtals, especially sJjaaimar.. Estimates wereDcatterad reforonceo to pnroartrge gains for Individual metals Inliterature. The series of rdumlnna production figures hasfron official ennconceinaats of percentage Increases In output.

atloaalnd

i^sa

detailed report on tho iadecosa in thin paper iu bsdng preparedelae*bevo.

20. Plastica in ssrsrlc tens vas ei-Dcunced Toy /nruahcherd party

congress cpesch inI-

Soviet pubUcafcioaRonnage figure7 to Khicb percentage increases for the0S can be linked. Ertimtes for the13 vere interpolated. Xadexoa for the years8 ore aoEwaed to to ia5 planned, goal.

of jaachiEery cats&ories into codoix orin vsrtouo technical journals baaea norebreakdowns; of tractors into individual ssdeloj of diosellocomotives into sodsOs. Oars and tracks could not beindividual models, although indorsation in technicalthat disaggregaticst radsertha index especially in the case

eenipmant; an eanomictd series in tonsVto so oanoacced seriesonstrnt ruble values thereafter.

a. Civil'.aircraft; almost no production data ere available but infcreation concerning the Inventory of vorlouaof aircraft in Aejroflot at various tines has been found. 1Mb la supported and supple--nsnted by flight ti&stoblsn from ubich inventories can also bo deduced from estimated utilisation rates, froc^uetloa series arc then estimated froa tbe Invwitories. o astfeaatee of annual proaucvio* that result mast be quite lnaecorafco. However, the estifiated ffrarago rote of prodnetlon la the ciscond half oferiodco tcut in tba Sirs*txld increase, should be of the right order of

21 now that Aeroflot, priorngice pioton aircraft stbaoat atelcci'mly,6 was ia large past i'e-saaipped with $eb sadircraS't, aid. -feast passenger klloartesr flceaia-neI swd fredglrc teaiBSD.

shipsdoo production informationToutare risible at sea. Hot only is an accuratebut close estimates of size of weight and date of appearancesimple to derive and are compiled by several of the naviesmarines of the world regarding each other'a shipping. on Soviet merchant fleet baa been collected by the Tho production estimates here are deduced froa this

in rectory information. Because of some uncertainty in Individual periods of construction, annual figures may be lnprecaUa, but production trend-over BSreral years are quite accurate.

there can be llttlo question that thisconpenants that are vital to many postwar weapon systems,to nrtsalIn systems and space programs, has bean growingthe Soviet Unionnail base immediately after the war. ore than threefold increase In gross value The estiaatea of veins of output of electronicsore based on announced Soviet number and value of electron tubeswhich In tho US hasairly constant/ The value of Soviet final output la derivnd fronratio of vnlno of shipments oftput to value of tubes

Adding imprecise aerlaa to an Indent does not necessarily improve it. With this In mind each nev series has been exirtlnad for reeeoaableneoa In the iltfrt of related economic actlvitios. Thus, the rapid growth In production of chemical equipment is consistent with the rapid growthe

22. US Department of Commerce, Maritime Adnlnia trot ion. Merchantf

the World, publishedear,une and. Electronics Industries, Electronicsnd p.

production of chemicals. Kore Inportnntly, in the canon oX production of civil aircraft and electronics which significantly rodeo the entire index, the estimating nrodecures or incompleteness of data tend strongly vouard conservative eetiratee. In aircraft several recent nodo.'ji of helicopters are emitted for loch of data. Helicopters, Includingrld's largest helicopter, have appeared in considerable nuabero in the USSR in tbe loot feu years and Inclusion of these would surely increase the growth of the aircraft serins. 01 the estimated production of passenger aircraft (other than helicopters) declines sharply. Hev models of aircraft have been heralded in the Soviet literature already but have not been reported as yet in the Aeroflot inventory. Since It la likely that these models already are in production their emission understates production0I by on unknown mount.

In the case of electronics the useS relationship of value of tubes to value of final output probably understates the Soviet value of final product. In the OS civilian radios and TV's, Involving saail tubes,uch larger part of the total of electronics production than in the USSB. where military demand for increasingly catsplex ccmnxments ban boon the dominant and the most rapidly groving portion. In ccvhlcingproduction with other elements in the nachlnebullding hector, tho fobtor-growing electronics has been given only 'to own value-added weigit, assumed tof value of output. Thus, It is isaxlicitly ensue*ft that all iraehlnery products -Biasing frcec tho sample- the sns rate as oon-clactrcnlcs nachincry vhich growslower rate than electronics.

Bo armaments production data as such ero includad. KUltnry purcaasss of nnrcbant ships and transport aircraft aro excluded (for Lack ofut the production aarlas for all other industries are ooayrensaslTO and include production destined for ail iter/ aa vail as civilian use. Ia> portent example* of dual use are trucks, automobiles, tractors, and electronics. IX. Weights

The Index la Intended toalne-oddad weighted Index such aa that of the IHB index. Information for constructing valno-edded woighta la available only for najcr sectors of industry (those shown in Table 1 Caanodltles within major sectors are weighted by prices, retail prloaa (adjusted to exclude distribution charges) In the oaaa of foods and const tor nonv-dnrahlas and factory wholesale prices for all other connodltlas. The approximateweights for major sectors are calculated fron waga data and estinnted depreciation la each sector. Both price* andweights am far the

In the absencene-eodad weights far lndlvldaal ocamodltlas, an effort baa bean nada to laclnfle dlffaraat product* at the highest stage of fabrication and to emit inte-nodiate and low stages. Thus, rolled steel products are included but steal Ingots and pig iron are not. In the machinery sector the items in tho sample are almost all final products. Intermediate uunyouaule such an ball bearings or snail electric motors are endtted.

Since armaments are excluded frcnt the index, the value-^dded weight for miliTawiijas been, rodncad to reflect only civilian products,

Zh. See p. 6-

Value added for machinery consists of the wage bill and ecortlzaticn In the Soviet category each1 rebuilding and octalvarKloft'*.

US avco is ii;arox-:satoly-. ic-tf.-acy ccituiiLm edOed in

>' wthe ifcci that aoai c* slcvUini.-r^ ctrlpm; iofcv Eiiioffj voss; Scr crarple, inter aejte Tna aissilc tpttdeat*. fee csssce ttBiB half of electronics -aiiy? of output,;keo, is value aiutoriof this -in Wrffd la civilian ceo.ihl:^

/ tiuo added forillion vablcno&illion rubles io obtain va&uo eftssa for output of'ccti'CMics civilian5 billion rubles. Of thotfilMtfflM TiilMlll tuil valvo-iddod volfiht,itiEery eacOiaiiiiii eledrcaics accounts5 sarcent and etIecixraicKnresat. HI. j.cicncics of tbe Zcdas

aa^crr deficiencies of the index arc ^Xsr^'irtBd "colc-r:

a- izlicatcd etors tho OKple layranrdS iires of urodnctlio al cet ntaae caly. cc caaaored tondex it rcxOccfce ehwrjEPlty and ^nciity poorly. Tbe scab srostarf ogs^gaiej.onKjv trrlot jarfax IfcMtMindex also Tcaylta. ccorer vatftooWer

ak*.n ^To&scfcs wna

llaviaTafeafc* Scwia* Jr>

tbsre

rtvfcu toxtcst fchci/tcn fceoKlialiMj quality cad

r^.ve'naarlo*.

b. IVsoltasaa nr?r

vapcrt save brar-.te no* ^ipfir'.

1). hemicals end products

2). rton-eJoctonic Instruments, metal fomilng equipment, food processing equipment, and many minor types of equipment

very large category of fabricated metal productsMachinery Is unrepresented. This category includes among othershapes, fencing, nails, screws, nuts and bolts, hand tooIn,

and metal drums, cans, and other containers. Oils category accountsercent of value added in thendex and may bo large in the Soviet union also. Ine official index for metalworitiiig growsittle faster than that for all Industry. ZjJ Jt we can trust the Soviet gross value Indexes this far, the emission should not seriously bias the index.

parts of all kinds are missing. Tbe Sovietsn aeries on the ruble value of spare parts for tractor,machinery, and automotive equipment. This series rises0 to more thanillionillion rises considerably faster than all industry orubstantial fraction of the valne of the latter. However, we do

not know enough about the coverage and construction of this series to have

much confidence in it. It may represent only prod action in specialized factories. On the other hand, there Is reason to believe that spare parts production has risen rapidly and that its ccnl03ion from tho index results in some understatement.

W< Official index for mtalworking5nd for.

as

e. Finally,1 prodnstlca data Included In tba index ore prelinlnaxy. R baa not yet issuedI volume of KuWooal Kcoosmy. Ileauuber of our eerie* ereon the baaiB of indirect indicator* or previous trends.

Ve can not, of course, be sure vbet tho affect of these amissions vould be. However, considflrrttloa of the oolttcd products Buggoots that th* PJfl nil STsd lrjossi In at least as likely to ho usdersteted ason this account.

which sro specifically excluded, are undoubtedly of

puff tclent iapcotanco to altar oigKiflcaatly tho trend of tho index. Another nlsalng olonQot is production of hnrdBoro for tho apnea progre-s. This activity has grudnated free the rare end exotic class into big buolaeas, and is perhaps the most rapidly growing activity la Soviet ladnstry

AMUDTJt B

CCMPARI3CM Of CALCULATED MACHIHKHY CTJIWr

Since tho aain divergences and uncertainties of tbe calculated index center in tbe machinery field, we would like to find some test of reliability of the machinery series. The announced Soviet index of gross value of production of nechlnebulldlng and metalvorklng grovs even faster than tbe calculated rjechinery index,ercent01 compared withercent ror the calculated Index. We cannot, however, distinguish between divergences that arise from difference in coverage (the Soviet Index laclndes armaments as well as other things Biasing from the calculated Index) and those that arise from statistical malpractice in the Soviet index.

The Halted coverage of the calculated machinery index is more comparable to the equipment portion of the Soviet investment index. This Soviet index is compared ino the producer durables portion of the calculated index, that la, tho machinery index ofinus consumer durables and both with and without electronics.

Tabic it

BquiuKent Portion of Official Soviet Investment Index Compared to Calculated Civilian Mjichinnry Index, Willi and Without Electronics

billions5 rubles)

" Calculated Civilian

si

Fortion of

vlet Investment Index

ii

Kleetronics

fcUectroulcs

"

3

"lixcludTng consumer durables.

Since eJecti-cnicc includes iters fcr nllltery use, the series including it has toooverage. On the other hand, the calculated seriesssple, -chile the Soviet index la cospreheasivw. On account of Its coverage of unique items and new products, one would expect it toittle faster than tbe sample series. But in addition it is possible tlnrfc tbe Soviet index is overstated on account of pricing of new products

coo -uncertain reporting. Finally, tha investment index shouldine las behind the production index. Allouing for theseonclude the Soviet and calculated index provide some confirmation for each other.

s

able 5

Data Tor Chartactors in Soviet Industrial Growth a/

Index ofof Capital lavestnent Index of Combined Hotel/

in Industry b/ in Industry

5

Civilian machinery excluding electronics In Chertroaf this report.

b. Schrccder, Gertrude, Soviet Into trial Productivity. Paperto tbe Joint Economic

c' gapitnl'Doye stroltelSSR. (capital Coos traction inI. d. Derived from data inf this report.

Original document.

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