SOVIET ECONOMISTS ADVANTAGEOUSLY EMPLOY DOLLAR NATIONAL INCOME COMPARISONS (CB

Created: 5/2/1961

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SOVIET ECONOMISTS ADVANTAGEOUSLY EMPLOY DOLLAR NATIONAL INCOME COMPARISONS

.office of research and reports

CENTRAL INTELLIGENCE AGENCY

This report represents tho immediote view* of the originotlng Intelligence component! of the Offlco of Research and Reports. Cormnenls are solieiied.

This document contains inlorntotion affecting the natioi.sl the United States, within theie^Espierage^ Tl'ie'SC,,evelation of which In any manner to an_jmatrtnor_ed person is*^prohlblted by law.

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SOVIET ECONOMISTS ADVANTAGEOUSLY EMPLOY DOLLAR NATIONAL

Soviet press reviews of comments on the recently published Soviet statistical compendium The USSR In Figures: 0 haveseveral comparisons of Soviet and US economic'hat Is novel in the set of comparisons apparently appearing in tho handbook are estimates of per capita national Income interms for the USSR, US, Great Britain, France. In the Soviet comparison, the USSR's per capita national income is half that of the US, and greater than that of the UK and Franco, two of ghflu leading economies of Western Europe. On the other hand^ORS^estlm-ates of per capita gross national product (GNP) show theCSSR to be considerably smaller than all three Western economios. The sharp differencos in results between tho two estimates can bein terms of differing concepts as to national income and different conversion ratios, not only between rubles and dollars, but also between dollars and pounds sterling and dollars and francs

Estimates of Per Canit* In

ana yer Capita

Soviet Estimatef National Income

timate

of Differing Concepts of Nat

Income

to the traditional Marxist concept thatis limited to the sphere of material production of goods or of services directly connected with their production, the Soviet concept of national Income excludes incomes generated in what the Soviets term non-productive sources. These incomes are Included ln Western measurements of both national Income and gross national product (GNP). Non-productive incomes aside, the Soviet concept of national income is equivalent to the Western concept of GNP. In our national accounting methodology, GNP equals national income plus capital consumption allowances plus indirect business taxes. Since the services have been tho most rapidly expanding sectors ln highly advanced economios, the effect of using the Soviet concept of national income is to lower the magnitudes of national product of the US and Western European economies relative to those of less advanced countries. In addition, since most'of these excludedare consumption-oriented, their exclusion rebounds to the propaganda advantage of an economy like that of the USSR in which the consumer isow priority on resources.

Since it may bo assumed that the Soviet measurement of US national Income is derived directly from adjustment of US data, comparison of the Soviet and^ORR^per capita estimates of USproductirect'measure of the degree to which substitution of the Soviet concept reduces US product in.

* The actual publication does not contain the relevant

Page

tie of per capita Sovietr-

al incomers SotsPer "Pita UK and

statement by deductionextcnt ofaflonal proSuotof tho"

effect of using the Mar the ratio to over half.

French GNP relative to that of the USSR Effects of Conversion Ratios

*

If the announced per capita dollar national lncone of the USSR Is compared with ah estimate Ofubles per capita,from official source's,uble-dollar ratio ofublesmerges. This ls about the same as the ratio computed bx^aR^in its comparison7 rubles9 dollars. This identity in conversion ratios vanishes, however, whenin concepts of national product are taken into account. Ruble-dollar ratios are lowest on those services expenditures which^are. excluded if the Soviot income concept is adopted. Thus, if tWCpRRT?uble-dollar ratio were adjusted to conform to the Soviet measure,the resultingruble-dollar ratio would bo much higherxistIng^Mfflgfestlmats.

The conversion ratio error is even more glaring in itson the estimates of UK and French per capita dollar national products. The technique by which the Soviet economists derived dollar estimates for tho three countries cannot be deduced from the data presented, but the relationships between their pernational products and that of the US are similar to those that would be obtained by converting estimates In pounds and francs into US dollars at prevailing oxchange rotes. Studies by Western scholars have concluded that exchange rates seriously understate the internal purchasing power of Western European currenciesto tbe US dollar. 4/

Tho(ORR^estlmatos In the table are based on conversion ratios representing the geometric average of dollar and European priceselected sample of goods and services The effect of this adjustment is to raise UK per capita GNP byercent and French byercent over the values obtained by exchange rate 5/ Thorefore, the Soviet measure understates theof UK and France relative to the USSR not only by using tho narrower Marxist concept of national product, but also bypound-dollar and franc-dollar ratios in tho UK and French estimates.

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Analyst:

Sources j

BSE^ CUSSR

port lilEa"

? estimates9 dollar terms by im-

conomic Report of

n rS ^rf th0 Wogato deflator Is'

S6may not be representative of

5 o WOUld lntroduo- -liBht distortion into9 dollar estimate for these two countries. 9 population figures from CIA/RR, op. clt., ^

lanned to

? ncreaselnansy SSSR. No 5

om "Prints an increase of lio billion rubles

hC arae source national Income9 rose

tho Dfvlding the higher estimate by

income

adj

deo-etric averages obtained from CIA/P- 1. eeor description of subsequent

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Hay1

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