CIA HISTORICAL REVIEW PROGRAM RELEASE AS SANITIZED
TITLE: The Validity of Soviet Economic Statistics
AUTHOR: Edward L. Allen
A collection ol articles on tho historical, operational, doctrinal, and iheorciical aspccls ol intelligence.
All sia:emenis of fact, opinion or analysis expressed in Studies in Intelligence are those of
die authors. They do not necessarily reflect official positions or views of the Central Iniclligence Agency or any other US Government entity, past or present. Nothing in the contents should be construed as asserting or implying US Government endorsement of an article's Tactual statements and interpretations.
Evidence thai Soviet planfigures are not seriously
THE VAUDITY OF SOVIET ECONOMIC STATISTICS Edward L. Allen
The publication, beginningariety oftatistical handbooks on the economy of the USSR signalled the endwenty-year data drought This shift fromtauri-lm posed era of virtually complete concealment,eport on the production of samovars wastate secret, has been most welcome. No longer is thef the Soviet economy forced to function like anpending most of his time digging for individual isolatede now can start with figures which, while far fromndeed quite skimpy by comparison with data published on the US. economy,ufficient basis for serious analysis.
A sufficient basis,alid one. Can we accept theseiet-suppllcd data as reliable and bona fide? Has thetatistical Agency at the bidding of N. S.otemkin village of false figures,abricated to deceive the West? Or, alternatively, are theo distorted at their source on the enterprise level as toeaningless when aggregated? Both these possibilitiesriefly examined in this paper.
Checks at the Enterprise Level
First, let us look at the possibility of falsification at the source. Consider at the outset the environment In which the enterprise director works. He is an instrument of theirected, government-owned and -operated economy. Themment collects economic data in order to facilitatendasis for the allocation system which channelsenuis and supplies where they are needed to fulfill Its ob- i
Jcctives. The operation of an economyystem of material balances, by allocation, requires accurate data. It Is therefore to the tatereSfc*of the centrai^ntrol authorities
has been made subject to severejjaflgjjjjj
Yet plant managers do manipulate output and Inventory; data, at the risk ot their careers and stiff Jail terms, asby the many horrible examples cited In tbe Soviet press and technical Journals. Why Is It they resort topractices? The usual reason is that the centrallyproduction goal lor the enterprise is very high;lso the director is at tbe mercy of his suppliers in his efforts to fulfill the plan. The successful industrial leader In the' Soviet Union, as in the United States, plays the game byules which are actually in force, not accordingtrictof legal statutes. The question is whether these manipulations are so widespread or ofagnitude as to invalidate production figures across the board.
Thereumber of in-built controls over the director within tbe enterprise itself. The chief accountant isle to tbe state for refusing to execute any orders from thedirector or other senior officials to fudge his accounts andeporting such demands "up thenother planthe chief of the quality control department, is subject torisonment if he falsely certifies substandard products asng stipulated technicaloreepresentative of central authority within the enterprise Isecretary of the Party organization In the plant, and his salaryIs paid from Party funds, not by the enterprise. The role of the Party apparatus In guiding and monitoring thef enterprises has been greatly increased since Stalin's death.
Another completely independent plant official Is the chiefhe "specialr secret police, who is extremelyaid and who maintains dossiers on all key enterpriseonnet This enforcement officer is almost certainlyhrough his network of informers, of any shady or illegalbeing carried on in the plant. Ii some such activities, however, are necessary to carry out the government's, black-market purchase of materials needed to meet theproduction goals of the enterprise, formay decide to tolerate them.
Finally, the books of tbe enterprise are subject to inspec-
Ministers. Representatives ot the Ministry ot Finance, period- ', Icaiiy collecting proBtsand tares,.check this aspect of theterprise's financial performance against the plan. The Min-Istry ot State Control polices aU enterprises charged withng out the decrees of the Council of Ministers and hasowers to subpoena the records of any unit under suspicion. '
Tbe State Bank also plays an important rolend Inspection arm of the Council of Ministers.ll financial activities of anpurchases,ayments, sales,reflected in the transactionsorded In its account at the Bank's local branch. The Bank Is responsible for auditing these transactions to Insure that they correspond in detail to the specifications of the plan for production. Capital expenditures of the enterprise arecontrolled and reviewed by the Construction Bank of the Ministry of Finance, which disburses investment funds.
As long as the enterprise is functioning successfully, the watchdogs of the central authorities permit the director legal elbow-room. Thus, if he needs to "borrow" one percent of next month's expected output to reach this month's plan goal no one is likely to object to his reporting the plan asBut this borrowed production must be made up in the next accounting period by subtraction from the then current production. If the director continues to fall behind, one orof the enterprise watchdogs will denounce him to the higher authorities and receive credit for uncovering the "skandaL"
The system, as It Is reported by hundreds of Soviet refugees to operate in practice, thus lets only marginal andmanipulation of output data go unpunished. The error Introduced Into Soviet production figures by such distortions, one would then conclude, is in all likelihood too small towith their usefulness.
We In Intelligence have further means to check theof individual enterprise reports. Military and civilian embassy officials have been bag from Iron curtain count
In some cases, though not tn all, the Western experts have been able to check production recordserved plant4 capacities. In the Soviet iron and steel industryheck was extensively carried out, plants representingercent ol total Soviet capacity being Included on the Itineraries. No case of falsification has been reported, although some data given. delegates by the Soviets are regarded with skepticism.
Special mention should be made of particular problems which affect the collection of agricultural statistics. First of all, there is the problem of the competence of the ruralDespite the sweeping claims made for Sovietonlyercent of the adult population9 bad had eight years of schooling, and the proportion in the rural areas was undoubtedly lower than this nation-wide average. The quality of Soviet agricultural statistics has suffered from the consequent lack of adequate training given the collectors.
Secondly, the typical peasant expertise atdust in thedevelopedine art in response to the challenge of the Tsar's tax collectors. That it continued to be practiced long after the Communistwas shown by1 Soviet decree that no reportollective farm claiming the death of an animal from natural causes would be acceptedeterinary's corroboration.
Through roost of the years of the Soviet regime, the final authority for estimating crop production lay with the Office of the Chief Inspector for Estimating Crop Yields, attached to the Council of Minis lens. This office reliedtaff of local agents to inspect reports and used historical correlations of weather conditions with crop yields to check the validity of local reports and determine output. It is interesting. mtelligence officers now use this same technique to judge the reasonableness of official Soviet claims for agricultural cropAgricultural output statistics are still regarded as generally less reliable than industrial production data, and the agricultural delegations which have gone to the USSR under the exchange program have provided few. Ifhecks on the published figures.
There are,umber of current developmentsto Improved agricultural reporting, to wlt:snai**; dffc-
The rapidly Increasing size and decreasing numbers of0 to0 inmust be resulting in the assignment of better quail-fled personnel to prepare statistical reports.
The increasing percentage of agricultural output givenprocessing before going to consumersthe center receive relatively accurate data in orderfor the food processing
The progressive substitution of money wages forn kind to labor will reduce Independent marketing ofective farm produce, putting more of it under stateand facilitating the spread of economic
Integrity at the
We can move now from the origination of statistics at the; farm or factory to their collation and publication at the cen-ter. Statistics are an essential operating tool for an economythat relies on allocation ratherarket price systemas its controlling mechanism. Lenin's decree8 set up the first Soviet statistical organization, and an industrialas taken the same year. 8 the Centraldministration has been an independent agency reportinghe Council of Ministers, with Jurisdiction over reporting forms and authority to check on the accuracy of reportsrom subordinate echelons. The CSA runs its own schools for training accountants and statisticians, writesnd develops calculating machinery. It receives quantities of! reports covering quarterly, monthly, ten-day, and. if tbeect is important enough, even daily results.
The reports that CSA receives must be reasonablyf the central system of allocations is to workommodities were still reported under centralized distributionncluding the most important ferrous and non-ferrous metals, fuels, chemicals, andry. The question of the integrity of the CSA statistics is thus i
reduced to whetherjt publishes total production figures. .
la ted to the sum of 'the plant production figures It receives, j
In other Krdi, docs It keep two sets of books,peration of tbe economy, and another to throwWestern
Our most comprehensive check on centralized reportingavailable at the dose of World War TJ. The Oerman Army, In Its penetration of the USSR, hadage statistical document carrying the official Soviet security lassification Sot for Publication and entitled "State Flan for the Development of the National Economy of the USSR" This document was recovered from tbe Germans by . intelligence personnel, and the data contained in It were compared with openly published statistics, particularly those given ath Party Congress. It was found that the openly published data were Identical, except for minorthat could be accounted for, with those In the classified document intended for the official use of Soviet planners.
It should also be remembered that Soviet officials need not falsify data to keep tbe West uninformed- The USSR can easily withhold Information either for security reasons orIt would reflect unfavorably on the regime Since the Communists first came into power they haveolicy of selective release of data The controlled release ofion, although usually designed to mislead, isnd practically quite different from falsification.
One of the best examples of Soviet manipulation of data for propaganda purposes was In reporting grain production, when they shifted, for tbe. from quantity(barn yield) to the larger figures for the size of the crop in the field (biologicallthough they madeecret of this switch from standard world-wide procedure, some unsuspecting and careless Western writers accepted theyield figures without correction for comparison with Western barn yields.
Need for Interpretation
The Interpretation of Soviet commodity statistics. Inwith those of other countries, depends upon definition of the categories being measured Soviet definittons*and usage are often different from those commonly accepted in the United
* ' 1 l T
Stales. Some such lack of direct statistical comparability exists, of course, In the economic data of any two countries, but the reconciliation of Western data is usually an easy task because of explanatory notes appended or explanationsin convenient source books.
Such Is not the case In the USSR Often terms are not explicitly defined, and their meaning must be determined by laborious cross-checking. For these reasons, the statisticseased by the Soviet Union must be screened very carefully1 and not assumed to be comparable. figures unless so proved by rigorous analysis.
Finally, Soviet aggregate statistics, such as those stating: total industrial and agricultural production and nationalwhatever merits they may have for internalof progress or external propaganda purposes, cannot be: compared with similar measures of total economic activityby Western nations. The conceptual differencesEast and West are too great. For example, the Soviet definition of national income is one of physical production, excluding most of the governmental, professional, and domestic1 services included in Western income definitions. Variantds of pricing manufactured products probably introducearea of noncomparability.
The Soviets have released enough data on physicalhowever, to enable us, by augmenting it with additional commodity figures obtained through mtelligence research, to compute reasonably satisfactory indexes of both industrial production and national income in terms of Western concepts. These computations willecessity: no matter how liberal the data disclosures of the Soviet leadership in the future, it is unlikely that they will supply us withof aggregate indexes based on non-Marxist definitions.
We can be reasonably sure that economic data presented by the Soviet Union will continue to have both meaning and significance. The major research problem will remain in tbe future what it has been in thefind out Just what this meaning and significance is.