THE AVAILABILITY AND VALIDITY OF ECONOMIC INFORMATION ON THE USSR

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01048A000100010010-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 16
• Document Creation Date: December 16, 2016
• Document Release Date: March 31, 2005
• Sequence Number: 10
• Publication Date: January 1, 1953
• Content Type: REPORT

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OSD Declassification/Release Instructions on File
THE AVAILABILITY AND VALIDITY OF ECONOMIC
T NIED-4 IIATI ON ON THE USSR
Robert Arn?ry, Jr.
INDUSTRIAL COLLEGE OF THE ARMED FORCES
WASHINGTON, D. C.
195 - 1953
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THE AVAILABILITY ANA VALIt)ITY OF ECONOMIC INFORMATION ON THE USSR
2i March 1953
INTRODUCTION-Brig. General L. J. Greeley, Deputy Commandant.,
Education Division, Industrial College of the 1
Armed Forces ....................... .?..............
SPEAKER--Mr. Robert Amory, Jr., Assistant Deputy Director/
Intelligence, Central Intelligence Agency ............... 1
Publication No. L53-119
INDUSTRIAL COllEGE OF THE ARMED FORCES
Washington, D. C.
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THE AVAILABILITY AMID VALIDITY OF ECONOMIC flFCL MATION ON THE USSR
24 March 1953
GENERAL GREEIEY: f+Know thy enemy." Well, we certainly know who
he is. Also we know what his intentions are. So far as we are con-
cerned, they are all bad. But just how bad? It seems to me the real
problem facing us then is to determine what are Russia's capabilities,
and especially her economic capabilities, to fight. us in an all-out war.
Our speaker has been working in this field for some time. He is
still directing his efforts toward a solution of this most difficult
problem. Today he will discuss the availability and validity of
economic intelligence information on the USSR.
Incidentally, this morning's Post carries an announcement that
Mr? Amory has been appointed to the newly created National Security
Planning Board of the National Security Council. He tells me thatthis
new honor is in addition to his other duties.
I am very happy to present to the College Mr. Robert Amory, Jr.,
of CIA.
MR. AMCHr: General Greeley, Admiral Hague, and gentlemen: It is
a great pleasure for me to be here,
I am not going to elaborate further on what the General said about
the importance of economic capabilities as the underlying or fundamental
measure of the strength of our enemy, I think we are all aware that,
looking at him for a reasonable span of years ahead, three to five, for
example, his-order of battle or his exact production of end products
today, are of considerably less importance than the resources he has and
the industrial potential in his possession to create end items or supply
his line of battle or his fleets when he decides to commit them.
I think it is interesting--and it is gratifying to me--to find how
well accepted this general thesis is. You probably know, and have read
in the papers,, that the President has called upon what are now known as
the Seven Wise Men to come to Washington from all over the country and
help in advising him and the WC with respect to over-all national policy--
what he can do within the limits of our national economy. When we got
through briefing them a few days back, they were all in general agreement
that everything would be easy if they only could know for sure what the
real nature of the threat three, five, or ten years away was; and that
that all hinged on whether or not Russia was a mighty industrial power
or was in fact an agrarian-village econon with an exterior of industrial
might, with feet of clay and a rotten core.
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Now, to get to my subject, I am going to concentrate on a desorip-
tion first of all of the materials with which we work, and the methods
we use in converting raw information into finished economic intel-
ligence; and wind up with as frank an appraisal as I can giving the
margins of error that we feel exist in the economic estimates that the
intelligence community as a whole--all the services, the State Depart-
ment and ourselves--furnish the policy makers.
First let us look at the Soviet statistics themselves. As you
are probably well aware, the Soviets have very close and direct control
over almost all economic activities. They could not do that without a
most massive statistical administrative apparatus. It is interesting
to go back into the early years of Lenin. I found instances as early
as 1909 and another one for 1917, in which he exhorted his immediate
supporters in roughly these words: "We must first of all seek the
commanding heights of the accounts. Once we control them, then we
have the economy of Great Russia in our control."
Any consideration of the nature of the Soviet Union's economic
organization makes it immediately clear that that nation most have a
large and elaborate statistical organization. As is well known, the
Soviet government owns and operates much of that country's economy
directly. In addition, virtually the entire economy is directed by
means of a centrally-formulated economic plan covering all significant
areas of production and distribution domestically, as well as the
nation's foreign economic relations. Obviously this kind of centralized
control and operation over an economy involving over 200?000,000 persons
would be impossible unless: the administrators and planners of this
economy had comprehensive and current statistical data to guide their
decisions. The gathering and compilation of these data, equally
obviously, require an organization and personnel commensurate with the
tremendous task involved. Against this background, the Soviet statement
that the USSR has over 2,000,000 bookkeepers, accountants, economists
and statisticians engaged in this general field is quite credible.
The skimpy quarterly and annual economic reports released by the
Soviet government in recent years give, therefore, a most misleading
notion of the volume and detail of current Soviet statistics. A. much
more adequate idea of the extent of Soviet statistics is given by the
large statistical annuals., comparable to our own statistical abstracts,
issued by the Soviet government until the mid-1930's as well as by the
even more detailed volumes issued almost two decades ago on such matters
as statistics of labor and statistics of agriculture. Such rich volumes.
are presumably still issued, but now they are classified and unavailable
to foreigners who must infer their existence. The secret 1911 economic
plan which, through the fortunes of war, came into the possession of the
non-Soviet world after World War II is the latest large volume--this one
having over 700 pages--giving us a concrete indication of the magnitude
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esumably only a major lessening of world
ever again duce the Soviet government to make such
information freely available.
Because of the tremendous extent of state ownership in the Soviet
economy, the borderline between statistics and accounting is to some
extent rather hazy in the Soviet Union. Since that country is from
many points of view simply one giant integrated economic organism, it
might be thought that the problems of collecting and analyzing its
relevant numerical data are more akin to the internal accounting problems
of a large--but far smaller- Pmerican enterprise such as General Motors
than to statistics as we normally conceive this subject. That there is
also some confusion on that subject in Soviet minds is evident from the
fact that the organization which is now called the Central Statistical
Administration was once known as the Central Administration for National
Economic Accounting. However, study of the relevant Soviet literature
suggests that in practice in the USSR the distinction between bookkeeping
and accounting on the one hand and statistics on the other is very
similar to our on use of these terms. That is, the internal affairs of
Soviet factories, farms, banks and the like are regarded as the area of
bookkeeping and accounting, while the collection and analysis of data
relating to a number of such quasi-independent enterprises (or relating
to a number of or many individuals) is regarded as statistics.
In the fall of 1928 the Soviet government inaugurated its First
Five Year Plan, and with this it soon found it expedient to curtail the
release of statistical data. One of the outstanding events of the
period of the plan, for example, was the collectivization drive and the
attendant loss of a major part of Soviet livestock herds. The Russians
lost within the few years 1928 to 1932 30 million head of cattle, or
over two-fifths of their total herds; 14 million hogs, or over half their
total herds; and nearly 100 million sheep and goats, or two-thirds of
their total herds. These losses were an overwhelming blow to Soviet
aspirations to ameliorate their Eastern European living standards with
larger supplies of animal products.
In 1933 the Soviet government published a volume heralding the
successes of the First Five Year Plan. The section on agriculture
abounds in statistics on peasant households collectivized, on the number
of tractors available, and the like. There are no data at all on the
losses of livestock. These latter data the government released separately
at later dates.
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A notable feature of the period of the 5 -year plans is the
inflation in money wages. Over the 12 year period 1928 to 1940 money
wage rates on the average increased on the order of 500 percent. This
is according to Soviet data, for the government has not hesitated to
release figures on money wages. It has not hesitated, either, to cite
these figures as one more evidence of Soviet economic progress. On the
other hand, it is quite inhibited regarding the measure of living costs,
which is indispensable if the meaning of the money wage increases is to
be adequately appraised. Publication of the Soviet official series on
the cost of living ceased under the First Five Year Plan.
The government has not hesitated to release money wage rates., I
should have said, until recently. In the last few years, it has omitted
to publish systematic figures on this feature as well. Interestingly,
there are many indications that this change in information policy has.
lately been associated with a change in money wage policy, in the direc-
tion of stabilization in place of the former inflation.
In the late twenties and early thirties the Soviet Government
published systematic data on wage differentials. The number of workers
was recorded by industry and by earnings class. Publication of this
sort of data largely ceased with the release of statistics for the year
1934.
On the degree of secrecy maintained just before the Germany attack,.
there is at hand a very interesting measure. In February 1941 the
Fourth Five Year Plan.was the subject of a speech delivered by
N. Voznesenskii before the eighteenth All-Union Conference of the
Communist Party. The text of the speech was subsequently published as
a pamphlet of 48 pages. This is the only public release the Soviet
government has made on the annual plan for 1941, .As. a result of the
war, there is now available in this country a version of this same plan
that circulated as a classified document in the Soviet Union. This. is
a volume of 734 pages, consisting exclusively of statistical tables..
Even this classified version is not complete. Data on munitions pro-
duction apparently were released only in a more restricted document.
I have said that the policy of secrecy is not new. Broadly
speaking, however, it is true that the policy has become more restrictive
in the course of time. An illuminating commentary is provided by the
successive releases of the five year plans. The First Five Year Plan
as published occupies four volumes; The Second occupies: two. The third
was released in one volume of 238 pages. The Fourth Five Year Plan
occupies three pages in Pravda.., .
Given the general trend to secrecy, there have been diverse oscil-
lations. Among other things, there was an extreme blackout during the
war. Since the war, data. have been released on some scale both with
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regard to the war and postwar years. The famous practice of releasing
data on production showing only the percentage increase from year to
year, and not the absolute level dates mainly from the postwar wt years.
This practice has not always been systematically applied.,
Malenkov's speech at the recent Nineteenth Congress of the Communist
party seems so far to represent something of a special case. Malenkov
releases a good deal of data in absolute terms.
What then, are .the guiding principles of the Soviet policy of
secrecy? In any full account of this complex question, no doubt, it
would be necessary to refer to two aspects already implied: military
security and effective propaganda to create favorable impressions.
Reference probably would have to be made, too, to the interesting ques-
tion of the need to release data for the operation of a nationwide plan-
ning system, including the training of personnel.
Coming now to the problem of the quality of data that are released,
an initial question concerns the quality of the statistical reporting
to the center by lower administrative echelons: the reporting by the
managerial staffs of the state enterprise and collective farms. Here
it is necessary to reckon first with the fact of falsification.
is often charged, an is in order. On this point,
we have the evidencet!~! tatements by the 25X1
Russians themselves. The falsification taKes ions forms, including
outright misstatements and improper classification; for example, the
misclassification of ordinary wage payments as repair costs. The
motovation apparently is to conceal illicit activities as well as to
create favorable impressions generally.
As you probably know, the planning system works down from the top
to a reasonably low level and back up to the top again. When it gets
down, we will say, to the head of a plant, he is typically in a dilemma:
If he submits a very fine goal, that is wonderful for the time being.
We will say, for the next eleven months he is going to be the fair-haired
boy with the ministry back in Moscow, or a. republican ministry at a
republican capital. But woe betide him when the final report is in and
he has only achieved 90 percent of his projected goal. He is headed for
trouble in the gold mines of Kolyma. On the other hand, if he says,
"I am going to stay on the safe side and put in a very conservative
estimate of what I can do with this plant," he is apt to get there
eeaween
year earlier1 So what he does is try to strike the happy medium
setting himself too high a goal and too low a goal. He tries to play for
a place in the center: a program which looks tough and constitutes an
improvement on the past, but one which he can in fact exceed.
I Ihas gone into great detail
in o g up the mec an3.sm or prn os ust how he can shade these
things in order to come out T,zi.th the very best batting average in tenure
of office as a plant manager. 5
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Even assuming that you get a fairly reasonable prediction, there
is also a great tendency to pad the final result by overcounting your
inventory, e.g., counting goods in process. as finished goods, in order
to get your result the way you think it will be most acceptable to the
top.
As to how. extensive this falsification by lower echelons is, the
Soviet statements on this subject make clear that the culprits may not
always proceed with impunity. There must be on this account some limit
to both the degree and the frequency of fabrication. On the other hand,
given the intense pressures under which the Soviet managerial staff
operates, one might suppose that it would be difficult for the govern-
ment to make the limit severely restrictive. The specific evidence that
has come available so far, Soviet state- 25X1
ments, seems to corroborate this general ression.
It may be hoped that in time we shall have more information on this
question of the extent of falsification at the lower echelons. Doubts on
this score inevitable lead to corresponding doubts as to the margin of
error in Soviet data generally.
Still referring to the statistical reporting by the lower managerial
staff, there must be uncertainties too as a result of limitations in
managerial ability. One thinks especially here of the fact that the
Russians have only recently emerged from widespread illiteracy. Very
likely this was still an important factor affecting the quality of
statistical reporting in the early years of the five year plans; in the
case of agriculture it may still be operative on some scale.
Checking of data to assure its accuracy has a unique importance in
statistical work in the Soviet Union; to find an equivalent phenomenon
in this country one has to turn to the work of the Internal Revenue
Bureau here in checking income tax returns for corporations and indi-
viduals. Errors of copying, calculation, and the like, of course, are
no respectorsof political or economic systems. But much more important
sources of errors in Soviet data arise from the fact that virtually
everyone reporting economic data to the C.S.A. has, or at some time may 25X1
have, the temptation to benefit from false reporting.
I
suggest a bas c principle of soviet managerial behavior simu-
lating successful performance by a variety of deceptive practices."
The volume of complaints in the Soviet press, including the tech-
nical statistical organs, indicates clearly that one of the basic forms
of such deception is deliberate falsification of statistical reports.
Perhaps the most open admission of the wide extent of such falsification
came in 197 when the Soviet government announced the formation of a
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completely new national crop inspection system in order to check the
widespreading overreporting of acreages and underreporting of harvests
which had taken place in 1946.
During 1951 and early 1952 the official organ of the Central
Statistical Administration, Vestnik Statistiki, was. full of denuncia-
tions of statisticians who accepted reports from industrial and farm
enterprises without the most careful checking and physical inventoriza-
tion. From these complaints, many of them voiced at statistical
conferences devoted to self-criticism, it was clear that Soviet
entrepreneurs engage wholesale in concealing the extent of the stocks:
of materials, in padding their production figures, and similar mis-
representation. Time and again the statistical workers have been told
that they must end their "liberal,' and "conciliatory" attitudes toward
such falsification, that they must overcome the