THE SOVIET ECONOMY IN 1956-57 AND PLANS FOR 1958-62

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01141A001100020001-5
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• Document Page Count: 58
• Document Creation Date: December 27, 2016
• Document Release Date: July 29, 2013
• Sequence Number: 1
• Publication Date: May 2, 1958
• Content Type: REPORT

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ZortriDENTIAL
ECONOMIC INTELLIGENCE REPORT
N?
THE SOVIET ECONOMY IN 1956-57
AND PLANS FOR 1958-62
CIA/RR 132
2 May 1958
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
CONFIDENTIAL
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WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 ? and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
(.4
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ECONOMIC INTELLIGENCE REPORT
THE SOVIET-ECONOMY IN 1956-57
AND PLANS FOR 1958-62
CIA/RR 132
(ORR Project 14.1546)
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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Summary and Conclusions
IV.
V.
CONTENTS
Page
)
Introduction . . . ? . . 0 0 * ? ? ft
Economic Performance and Plans) 1956 and 1957

5
AL, Fifth Five Year Plan Period . ? ? ? ? ? 9 O
.
.
5
B. Sixth Five Year Plan Goals . . 0000 ? ? 0 0
?
o
6
6
C. 1956 9.9.66400.00
6
IL 1957 ..... . . . .. .. ...... . . ?
.
?
?
10
Soviet Economic Priorities and Intentions
11
A. Economic Priorities Since the Stalin Era . . ?
.
?
.
11
B. .Ulocations of Resources Among Sectors . . ...
.
?
12
01' 'Incentive Measures '
14
L. Probable Future Policies . . . . ? ?
14
:
Problems of EconaniC Expansion . ? . ? ? . .......
15.::
A. Introduction , , , ? . ...
.
.-
?
15:
B. Immediate ?Factors Behind the 1956 Shortfalls .
?
?
?
16
C. Trends in Labor SUpply
17
1. 0ver.411 Labor Supply . . . . ... .: ....
.'
17
2. Allocation of Employment to Sectors
of the Economy
20,
Trends in Investment Costs . . . . . .
?
?
? .
22
1!?. Soviet Response to the Investment Problem.
.
.
,
25
F. Problems Of Management and of Organization . .
.
.
..
27
G. Impact of Foreign Trade upon Soviet Economic
TeVe101nent 4 ? ? ? o ? 9 ? ? 9 ?
28
Probable Courses of Action and Growth Projections
.
30
A. Introduction . ....
B. Projections of Future Growth
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32
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Estimated 'Growth of Gross National Produot,
1957-62 32
2. .COmparisan-of''Grostational Product in the
.uspli and the US . . , . .4 .. .. . 34
-3, 'Projections of, Industrial?Growth ? 36
4. 'Projections of. Agricultural Production. 37
Appendixes
Appendix A. Statistical Tables
? Appendix B. Methodology (Revised CER Index of Soviet Indus-
trial Production) 49
Tab1es
1. Growth of 'Soviet Industrial Production, Performance,
and Prospects Based on Official Soviet .Statements,
1951-60 7
2.? Soviet Completion of NewProduction Capacity 'and Per--
centage 'Fulfillment ofTlanain.Selected-Industriea,
Fifth- Five Yeat?Plan-and 1956. . ?. . . . ..... 16
?
3. Calculated Labor Force and Civilian Etployment
in the USSR, 1950-52 18
14. Civilian Fmploytent in the USSR, by Economic Sector,
1950, 1955-56, and Projections to 1957 and 1962 20
5. Distribution of Soviet Gross National Product at Factor
Cost, by End Use, in the USSR and the US, ?1956 33
6. Housing Space in Urban Areas of the USSR Per Capita,
? Selected Years, 1926-60 35
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7. Comparison of Gross National Product at Market Prices,
USSR and US, Selected Years, 1950-62 . . . . . 35
8. Production of Meat and Milk .in the USSR, Selected Years,
1950-60 . ? . ? OOO ? OOOOO 38
9. Comparison of Production of Selected Industrial Products
in the US and the USSR, 1948 and 1956 . 42
10. Estimates of Production of Selected Products of Heavy
- and Light Industry in the USSR, Selected Years,
1950,57 O ? ? ...... . . . . . . . . . 45
11. Indexes of Aggregate and per Capita Household Consump-
tion in the USSR, 1948-62 47
12. Estimated and Official Soviet Industrial Production
Indexes, 1955 51
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CIA/RR132
(ORR Project 14.1546)
THE SOVIET ECONOMY IN 1956,57
AND PLANS FOR 1958,62*
Summausionsan
From the announcement of the optimistic and ambitious Sixth Five
Year Plan (1956-60) in mid.-January 1956 to its virtual abandonment
in September 1957, the Soviet leadership exhibited an increasing
awareness of the need to reduce its optimism aoncerning future rates
of growth and to realign its economic plans to conform more closely
to a changed environment. To compensate for the newly emerged prob-
lems of shortages of raw materials and of worsened relations with
the Satellite countries, and probably in anticipation of rising in-
vestment costs and tightening labor supplies in the future, several
new and untested changes were introduced to the Soviet economy.
The original 1957 goals for raw materials) 'energy, and Machinery
prodUction Were revised downward as well as the plan fcji? raising
labor productivity.. The original, investment goal for 1960 was re-
duced, and"the reMaining_voluMe of investment was redirected, to some
extent, iii. favor of raw materials, agriculture, and housing. ,The
administration Of economic activity was extensively reorganited. A
new peven rear Plan was to be formulated for the period 1959,..65 to
strese, among other goals, the rapid exploitation of new raw materials
resources in the Eastern areas and the concentration of investment
among fewer projects
The uncertain outcome of the corrective measures launched during
the past year increases the hazards of projecting future rates of
Soviet,economic growth, but estimates both outside and inside the
USSR envision some redaction from the rates of growth achieved dur-
ing the Fifth Five Year Plan (1951-55). The forecast by Khrushchev
in November 1957 of the 1972 level of production of selected indus-
trial commodities represented, in every instance, a lower average
annual percentage increase during the period 1958-72 than was
* The estitates And Conclusions contained in this report represent
the best judgment of ppa as ofrcji 1958
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achieved during the period 1951-56. The revision of the 1957 plan in
February represented a substantial reduction from the rates of growth
which had been envisioned a year earlier at the Twentieth Party Con-
gress. The projections in this report, similarly, are lower than
those of a year ago.
The reported annual increase in industrial production in 1957 was
10 percent compared with 10.7 percent in 1956 and an average annual
rate of increase of 13.2 percent during the Fifth Five Year Plan.*
The restriction of raw materials to a higher growth rate may be
lessened during the next few years, but rising investment costs and
a tightening labor supply will prevent industrial production from
exceeding significantly an annual growth rate of 9 to 10 percent for
the next 5 years.
The lower rate of growth of industrial production anticipated for
the next 5 years will restrict the growth of gross national product
(GNP) during this period to an estimated annual rate of 6.0 to 6.5
percent compared with the annual average increase of 6.8 percent dur-
ing the Fifth Five Year Plan period and with the unusually high in-
crease of 8.9 percent in 1956, which reflected an
large increase in agricultural production because of ideal weather
In the new lands area.
Marginal but significant shifts in economi iorities since the
death of Stalin are partly responsible for the/ estimates' being
somewhat lower than those of a year ago. The/Soviet reaction to the
raw materials problem which appeared in 1956/indicated the extent to
which the traditional emphasis upon heavy industry had lessened in
intensity since 1953. Although the basic theme of the economy was
still the maintenance of a strong military posture and the pursuit
of a rapid rate of industrial growth, the leadership now showed a
new willingness to treat underlying causes -- in this case, housing,
agriculture, and the composition of industrial investment -- even
though an immediate economic gain still might have been obtained by
driving industry harder and depriving the consumer further in the
Stalinist tradition.
* The estimates of Soviet industrial production in this report, com-
puted on a value-added basis rather than a gross value basis, are
somewhat lower than the official Soviet rates throughout 1951,57,
but the trends of the Soviet index and the index used in this report
are similar.
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This approach of the Soviet leadership to present problems will
keep the economy from regaining past high rates of growth in the
immediate future. Furthermore, future trends in labor supply and in
investment costs will probably emerge as new .constraints on'industrial
growth. Low wartime birth rates will reduce additions to the total
labor force at a time when planned shortening of the workweek will
already have reduced the man-hour utilization of the existing labor
force and when the transfer of workers from agriculture to industry
hinges uncertainly on achievements in the further mechanization of
agriculture.
At a time when it has been found necessary to cut back planned
increases in investment in industry, investment requirements per
ruble of additional output in industry will be increasing because
of the need to concentrate investment in the more capital-intensive
raw materials sectors and the need to develop new sources of raw
materials supply in the Eastern areas. Current efforts to improve
technology and management in industry are not likely to offset the
rise of investment costs during the period of this estimate.
Political unrest and revolution in the European Satellites, in
addition to influencing the priority structure of the Soviet econ-
omy, have imposed a further drain upon the already straitened sup-
ply of Soviet raw materials. In recent years the pattern of Soviet
foreign trade has changed to reflect the rising internal scarcity
of raw materials, but the gains achieved by imports of raw materials
have been neutralized by the need to increase assistance to the
faltering Satellite economies in the form of exports of raw materials.
Trade relations with underdeveloped areas of the Free World have thus
far involved developmental expenditures by the USSR with little pros-
pect of return for several years. Available evidence indicates that
Soviet efforts to woo selected non-Bloc economies will continue.
Events of the past 18 months provide some insight into the capa-
bilities of the Soviet economy but have not, unfortunately, provided
the same degree of insight into the courses of action which the
leadership may adopt in the event that these capabilities are not
adequate. The present survey of Soviet priorities and capabilities
indicates that it will become increasingly difficult for the economy
to meet all the demands imposed upon it simultaneously to the extent
desired by the leadership. The resultant strains will, of necessity,
lead to policy changes and possibly to policy disputes. The probable
forms which such changes may take are difficult to foresee, given a
leadership which is prone to undertake far-reaching experiments in
economic policy.
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I. Introduction.
The Soviet Sixth Five Year Plan, presented to the Twentieth Party'
Congress in ,February 1956, reflected a Sense of accomplishment and an
aura of confidence engendered by the successful completion of the pre-
ceding Five Year Plan. The ultimate objective of catching up indus-
trially with the West "in the shortest possible historical time" con-
tinued to be expressed in a plan strOngly biased in favor of heavy in-
dustry. The marginal shifts in emphasis since 1953 had not signifi-
cantly reduced the ability of heavy industry to support a rapid rate
of economic growth. The ambitious goals of the Sixth Five Year.Plan,
with the exception of that for-agriculture) appeared feasible.
Foreseeable constraints-on this rapid development of the Soviet
economy were the decline in annual increments to the labor supply
and the problem of supplying the material requirements of a;rapidly
expanding industry. The programs included in the Sixth Five Year
Plan -- modernization and reeqUipment of industry and development of.
sources of raw materials in the Eastern areas if pursued expedi-
tiously seemed adequate to overcome these constraints.
Events since February 1956 have presented the Soviet leadershit)
with problems in its dealings with the Satellites and in maintaining
its own rapid economic growth. The response of the leadership to
these problems reflects its willingness to experiment and search for
new and different solutions. Although the USSR accepted the Gomulka
regime in Poland and renegotiated trade relations with the Satellites
it ruthlessly stamped out the revolution in Hungary. Solutions to
the growing raw materials shortages and to other constraints on growth
were sought in an unprecedented reduction in the planned rate of in-
dustrial growth for 1957, a sweeping reorganization of industrial
management, the promise of relative gains for the consumer, and finally
in the abandonment of the Sixth Five Year Plan and the consequent re-
liance on annual plans for 1957 and 1958 until a new Seven Year Plan
could be drawn up to guide the economy over the period 1959-65.
The changes in the personnel of Soviet top leadership and the
modification of priorities, implied in the 1957 Economic Plan and
in subsequent policy statements, force a reconsideration of the -
goals and priorities that had been the basis of previous estimates
of the future course of the Soviet economy. At the same time, the
industrial reorganization, the shortfalls in key Soviet industries,
and the modified priorities structure force a reevaluation of the
ability of the Soviet economy to meet the demands levied upon it.
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The outline of this estimate is as follows: a brief revieg of
events leading up to the current period is provided in II, below;
attention is directed in III, below, to Soviet economic prioritiet
and intentions and the probable trends in the period i95762; 8Oviet.
economic capabilities are reassessed in IV below; 01444 finalIy,.
the future consequences .of Soviet economic policy in the light of
Soviet economic priorities and Capabilities are projected in V
below.
Economic Performance and Plans 1956 and 1957.
A Fi'th Five Year Elan Period
Measures of theOxer.all? performance of the ? Soviet economy
-during the period of the fifth Five Year Plan presented a picture
of retarkable success. The gross national product (GNP) Of the
economy increase&at an average annual rate of 6.8 percent compai-ed.
with the.US.growth rate of only 4.1 'percent during the ,same period.
Industrial production increased by an estimated 65 to 75 percont.*,
'Progress in agricultural production, which had lagged dignifidantlY
behind-other ?sectors of the economy during the. first 4 yearf0ofh?
plan period,. 'apparently was reviving in 1955 in response.tda sOies
of reforms undertaken after the death of .Stalin. Marginal-Chaftg?
in allocations after March 1953 also improved the position or the..
Soviet consumer,' particularly the rural consumer.
General overfulfilIment of the goals of the Fifth Five .Year
Plan and gains in agriculture and consumption tended to obscure the
fact that agricultural production and labor productivity still were
deterrents to continued high rates of growth and that a new problem
was being generated during the 5-year period -- a lag in production
capacity relative to planned production goals. For example, capac-
ity in the iron ore industry was increased by only 60 percent of the
planned goal, and capacity in the coal industry was increased by only
83 percent of the planned goal. Fulfillment of production goals dur-
ing the Fifth Five Year Plan period in spite of such shortfalls in
the creation of new plant capacity postponed the necessity of restor-
ing a balance between planned increases in production and planned
creases in in capacity.
* The measurement of industrial production is. discussed in
Appendix B.
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B. Sixth Five Year Plan Goals.
The Sixth Five Year Plan, announced in mid-JanuarY 1956) re-
vealed a confidence engendered by the overfUlfillment Of the Fifth
Five Year Plan which permitted a, firm commitment of priorities strongly
in favor of heavy industry and a clear statement of the objective of
surpassing the capitalist countries in Per capita production. Never-
theless) the plan also indicated the awareness of the Soviet leadership
of the continuing need to ?strengthen agriculture and the performance
of the labor force. This awareness took the form of a, relatively
modest plan to increase industrial production by 65 percent compared
with the 70-percent increase planned for the preceding 5-year period)*
continued improvement in living standards) expansion of the housing
cOnstruction program, an intensive effort to raise the existing level
of technology in industry by modernization and .ah ambitious program of
introducing automation processes) and an overly ambitious expansion of
agricultural production.
. In the light of the past performance of the Soviet economy,.
the original plan goals of the Sixth Five Year Plan, except the goal
for agriculture) appeared to be reasonable. The level of capital in-
vestment was planned to be 990 billion rubles, 67 percent higher than
the level achieved, in the Fifth Five Year Plan period. Furthermore)
the pattern of investment was Altered to overcome the lag in the capac-
ity for production .of raw materials. The new investment program) com-
bined with the continuation into the Sixth Five Year Plan period of
many of the new measures introduced after March 1953, was apparently
considered to be sufficient to insure the successful fulfillment and
perhaps overfulfillment of the goals for 1900.
C. 1956.
The over-all measures of achievement in 1956 showed conider-
able progress toward the goals of the Sixth Five Year Plan, but serious
underfulfillment of goals in key sectors of the economy must have made
the Soviet leadership more aware of the extent of its economic prob-
lems and the lengths to which it must go to obtain solutions. 1/**
Industrial production in 190 was reported to be 10.7 percent above
the 1955 level, a rate which, if maintained, would be adequate to
meet the 1960 industrial production goals (see Table 1***). A year
* AB measured by the official Soviet production index.
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*** Table 1 follows on p. 7. ?
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Table 1
Growth of Soviet Industrial Production, Performance,, and Prospects
Based oh Official Soviet Statements
1951-60
,Percent
?
Average Annual
Rate of Growth:
1951-55'"
Reported
Increase,
1956
.Reloorted
.Increase
1957
Planned,
,Increase,..
1957
Annual Rates .
:Needed in
1958-60 to
Meet Original
1960 Plan Goals
Industrial production
13.1
10.7
10
'7
10.7
Producer goods?
13.8
11.4
11
7.8
11.2.:
Consumer goods
10.5
9.4
8
5.9
10.6
Labor productivity
7 :
7
6.5
5.4
9.8
Coal
8,4
10-
'
7.9.
4
8,7
Petroleum
13,3
18
17
15.7
11;3
Electric power
13,3
13
9.1
10
14.9
Crude Steel
10.7
7
4.9
6
10.5
Finished steel
11.1
7
5.8
4.5
10.4
Cement
14.1
11.1
? 16
14.3
_ 24.0'
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of highly favorable weather made 1956 the best agricultural year of
the Soviet era. These two performances combined to produCe an un-
usually large increase of 8.9 percent in GNP above theJ19551evel. rflut
this picture was dimmed by an acute underfulfillment of plans for
construction of new industrial capacity. New Capacity scheduled for
1956 in the ferrous metals industry, for example, was underfulfilled
by 50 percent. Furthermore, underfulfillment of new capacity plans
in 1956 was accompanied by serious shortfalls in meeting prodUction
goals in several key industries. The 1956 performance jeopardized,
for the first time since the early 1930!si 5-year production targets
in several of these industries.
The top Soviet leaders had been forewarned of the impending
difficulties when the Sixth Five Year Plan was presented to the
Twentieth Party Congress in February 1956. .2./ The ministers of the
coal and ferrous metals industries warned that planned investment
in their industries would be inadequate to permit fulfillment of
planned production goals. Their warning was reaffirmed by the 1956
mid-year plan fulfillment report which indicated shortfalls in the
coal and ferrous metals output as well as lagging construction
activities. _V The accumulating evidence of poor economic perform-
ance and the unfavorable turn of political events, especially in the
Satellites, apparently caused a heightened concern over the progress
of the economy and a reassessment of existing problems. In December
1956 a plenum of the central committee of the Party explicitly ac-
knowledged that the economy had been overstrained and appointed
Pervukhin, the new chief of the State Economic Commission, to the
chairmanship of a special committee charged with the task of draw-
ing up the 1957 plan and reviewing the Sixth Five Year Plan. II/
A revised version of the Sixth Five Year Plan was to be drawn up
by mid-year.
The decisions issued by the December plenum left unresolved
most of the pressing issues which had brouebt the plenum into exist-
ence. Articles in the Soviet press throughout December indicated
that the official course of action still had not been clearly de-
lineated with regard to the housing construction program, organiza-
tional questions of management and planning, and even the more basic
question of the pattern of resource allocations between heavy and
light industry. The decisions of the December plenum indicated, how-
ever, that the top leadership was still not willing to admit that the
1957 plan or the final version of the Sixth Five Year Plan would have
to depart greatly from the original goals stated in February 1956 at
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the Twentieth Party Congress. But the 1956 plan fulfillment report,
issued in January 1957, graphically underscored the need for a con-
siderably, revised. plan. The report indicated underfulfillment of the
goals for production of coal, ferrous metals, and cement and emphasized
construction shortfalls in housing and in the coal, ferrous metal-
lurgical, and construction material industries. Production of steel
was considerably below the level necessary to meet the 1960 goal, and
labor productivity was lagging far behind the projected rate of in-
crease.
Most of he economic problems facing the new collective leader-
ship in March 1955 still existed in 1956. as well as some new ones
The problem of agricultural production was removed from the list, at
least temporarily,, by good weather, but there was no immediate pros-
pect of large-scale transfers of labor from agriculture to indnatry.
Underfulfiilmentof planned increases in labor productivity could no
longer be 'offset aa easily by increasing the nuMber of workers in
dustry. FUrtherMOre, the expected improvement in labor productivity .
gains had not materialized in spite of nearly 4 years. of experimenta,..
tion, first yith.the Malenkov attempt to increase workers' incentives
With an expanded .consumer go6a8 program then with various measures de-.
signed to reduce the degree of coercive controls over the labor force
and .to make the wage system. and working conditions more attractive.
Two new problems appeared during 1956 to increase the serious-
ness of these old problems, The outburst of nationalism in the Satel-
lites in October and November contributed additionsl strains. Soviet
imports from the Bratellites? notably those of Polish coal, were re-
duced; the need arose for renegotiation of eConomic relations with the
Satellites to forestall further disruptions; an additional element of
uncertainty was introduced into Soviet plans for demobilization; and
the possible effect of the Satellite disturbances on the attitudes of
the Soviet population perhaps entered into the eventual decision not
to cut back on consumer-oriented resource allocations in spite of
shortfalls in industrial production in 1956. The other nelW problem
which developed acutely in 1956 -- the pronounced failure to meet the
output goals for raw materials -- was aggravated by the continued
policy of reducing working inventories. Harassed industrial managers,
with inadequate inventories to fall back on to meet production goals,
had little choice but to express a rising discontent. These mounting
problems were the focus of the December plenum of the central committee
of the Party.
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D. 1957.
The outcome .of the December 1956 Party plenum and the conse-
quent revision of the 1957 plan were revealed at the February 1957
meeting of the Supreme Soviet, The new plan Provided: for an unprece-
dented scaling down of.eConomic goals _Rates of growth for industry
as a whole, for key raw materials and energy, for machinery, and for
labor productivity were reduced. compared with those of 1956. The
planned increase in industrial production, 7 percent, was the lowest
annual goal since 1929 and well short of the annual increase of 10.7
percent required to fulfill the goals of the Sixth Five Year Plan.
The industrial production. plan was.overfulfilled, however, reaching
a reported annual rate of increase of 10 percent. The plan called
for an increase Of 9 percent in Capital investment, a rate which was
lower than originally planned for 1957 and lower than the annual rate
for all postwar years except 1953 and 1955. The. new investment plan
was tailored to meet the demands of the more urgent problems encountered
in 1956 Sharp increases- were planned in investment allocations to the
basic materials industries, particularly ferrous metals and coal, al-
though planned additions to new capacity in pig iron and steel were
smaller than in 1956.
A striking feature of the new investment. plans. was the in-
crease in allocations to agriculture and. to housing construction. In
similar. times of trouble Under Stalin, these activities were always
the first to be Sacrificed in the effort to maintain an uninterrupted
buildup of heavy industry. The approach of the 1957 plan was to cut .
back immediate production goals to restore balance between raw materials
and production until new capacity, could be completed. ? In the meantime,
future- investment plans were to be reexamined to determine if they
could be reduced still further.
Eight days after the. February meeting of the Supreme Soviet,
a new plenum of the central committee of the Party was confronted by
-Khrushchev with a weeping plan to reorganize the administration of
industry and construction along regional lines in place of the exist-
ing functional organization of economic ministries. The final
form of the reorganization, as reported to the May 1957 meeting of the
Supreme Soviet, was less drastic than the original proposal, but the
number of ministries was reduced to 15; among those remaining were the
ministries dealing with defense, electric power, chemicals, transpor-
tation, and agriculture, 6/. Operational. control of many of the enter-
prises of the surviving ministries as well as the activities of the
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abolished ministries wasl placed under newlY, created. regional economic
councils. The number of remaining ministries was reduced further dur-
ing the year. The Official rationale of the reorganization was the
hope that better utilization of the resources of each region would
now be possible. It is not known to what extent political and stra-
tegic defense considerations may also have motivated the reorganiza-
tion. , Central control and-planning are still to be retained in the
Party Presidium, the Caancil of Ministers, and the State Planning
Commission.
The mid-I957 plan. fulfillment report indicated that industrial
production and investment mere progressing, at above-plan rates, thus
supporting the hopes of, the leadership that former rates of expansion
might soon be, 6ttAined. 2/ The continue& slow growth of some indus-
tries, however, particularly ferrous, metals and electric power, hinted
that a solution to the raw materials shortage was not yet int sight.
In September 1957 the Sixth Five Year Plan was abandoned, and reliance
was placed on annual 'plans alone for 1957 and 1958 until a new Seven
Year Plan could be formulated for the period 1959..65. .31/ In Novem-
ber, Khrushchev gave further indication of the growth expectations of
the Soviet leadership. 2/ Tentative production goals for 1972 were
announced .- in every instance representing more modest rates of
growth than those achieved during the FiFth Five Year Plan period.
The annual plan fulfillment report reaffirmed the midyear
results. Growth rates, still high in terms of Western experience
and generally 'higher than planned for 1957, Were below past Soviet
rates and below the rates which apparently had been contemplated in
planning the original 1960 goals. The aMbitious housing construc-
tion goal was overfulfilled for the first time in Soviet history,
but continued underfulfillment of some important-production goals
and a low rate of 'growth of'ferrous metals relative to that of past
yearS hinted that simultaneous advances, on many fronts created rigorous
demnds Upon the econamy which were not easily met.
Soviet Economic prior it e s and Intentions..
A. Edonomic Priorities Since the Stalin Era.
The Soviet economy continues. to be characterited by a concen-
tration of :econoMic decision4making, in the hands of a political dic-
tatorship which ,treats .consumption as a cost to, be minimized in the
drive, for .a rapid eXpansion, of the economy ,and In the ,preservation of
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a high level of military preparedness. Four years after the death
Of Stalin, the basic Soviet pattern of economic priorities (as indi-
cated by the end-use composition of GNP) still reveals the basic
orientation of the economy toward rapid growth. The growth in the
absolute size of the Soviet GNP has permitted the maintenance of a
high level of defense. Defense as a share of GNP has remained al-
most constant since 1950 and consumption has fallen slightly, but
the inveStment component has increased from 22 percent in 1950 to
26 percent in 1956.
A picture of basic Priority patterns, however, obscures the
marginal but significant shifts in allocations which have occurred
since the death of Stalin. The changes made from 1953 through 1956
were not sufficiently great td .cause an immediate reduction in the
growth performance of the econdmy, although the implications of
these changes niay have diminished the prospects for a continuation
of the high rates of growth achieved in the past. The rate of in-
Crease in total invettment_was maintained during the period 1953-56
although some shifts were made in the distribution of investment be-
tween heavy industry and the consumption sectors, especially agri-
culture. In the 1957 revision of economic goals the investment
total as well as its composition was affected. The 1957 annual plan
provided for a reduced rate of growth of capital investment and it
was indicated in April 1957 that the original Sixth Five Year Plan
goal of 990 billion rubles of state capital investment wasbeing re-
duced to 930 billion rubles. 12/
B. Allocations of Resources Among Sectors.
In spite of sporadic but vigorous discussions after 1953 con-
cerning the appropriate share of total state investment to be devoted
to light industry, this sector has made little headway. Except for
the Malenkov period in 1954, when 7 percent of investment went to
light industry, this sector has received only 4 to 5-1/2 percent of
total investment. Agriculture, on the other hand, has received a
continually rising shareof total state investment, increasing from
8.6 percent in 1953 to more than 14 percent in 1957. The increasing
level of investment in agriculture is reflected in the ambitious pro-
gram of development of new lands in 1954 and 1955, the upward revision
in 1956 of the goals for the output of agricultural machinery, and
the recently announced intention of bringing under cultivation an ad-
ditional 12 million to 15 million hectares of land during the next
2 years.
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The share of total state investment allocated to industry has
declined slightly from 64.6 percent in 1953 to 63.1 percent in 1957.
Of greater importance) however, is the. expected impact on the volume
of industrial investment of the indicated downward revision of.the
Sixth Five Year Plan investment goal from 990 billion rubles to 930
billion rubles and the impact on the composition of industrial in-
vestment of the announced increase in housing investment. Industry,
which normally receives more than 60 percent of total state invest-
ment, must bear much of the 60,tbil1ioni,rUble reduction in planned-in-
vestment, because agriculture and housing are slated to received in-
creased levels of investment in spite of the reduction in total in-
vestment. Furthermore,: the share of investment allocated to industry
includes some investment in housing, so the composition of industrial
investment will now probably contain fewer productive investments and
a greater proportion of nonproductive housing investment.- Housing
investment as a.,7share of state investment was 13.5 percent in the .
Fifth Five Year Plan, was 15.5 percent in 1956, was planned for 17 per-
cent in 1957, and according to the recenthousing decree will rise to
19 percent during the Sixth Five Year Plan,
A further aspect of the improved position of agriculture has
been the growth in recent years of the absolute number of workers in
the agricultural labor force. The increase in 1956 was probably
caused in part by the demobilization which released labor to all
parts-of the economy. But the increase in the size of the agricul-
tural labor force in 1954 and 1955 indicates at least a temporary
abandonment of the Stalinist view that agriculture constituted a
labor pool to be drawn upon whenever industry failed to meet planned
increases in labor productivity.
At the same time a number of measures were adopted which
simultaneously raised farm incomes and lowered government revenues.
The income tax on the agricultural population was cut nearly in
half in 1953, and in each year since 1953 the prices paid by the
state for. agricultural produce have been increased, As a result,
the ineome Of the agricultural population has grown significantly
faster than that of the population in general. The farm population
will receive a further benefit by the abolition in 1958 of compulsory
state delivery of agricultural products from peasants' private
plots. 11/
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C. Incentive Measures.
In addition to the increased allocations to agriculture and
housing, a number of measures affecting incomes and working conditions
have been adopted which cannot be explained in terms of maximizing
the rate of growth. The intention to reduce the workweek from 48 to.
40 hours was announced in 1956 and has recently been reaffirmed. In
October 1956).old-age pensions paid by the state were increased by
an average of 90 percent and state disability benefits were increased
50 to 60 percent over the previous level. Both the pensions and the.
shorter hours will have the effect of reducing the labor supply. In
January: 1956 the minimum taxable wage was increased and so also was
the lega1_minimum wage level. Further changes, in the wage system
were to:be made with the objective of relating individual earnings
more closely to quantity and quality of output. It was later announced
that the annual state subscription loan from the population was to be
discontinued in 1958. a/ Increased money incomes cannot improve
levels_of living unless matched by an increased supply of consumer
goods. They indicate to some degree, however, an intent, on the part
of the leadership to improve consumption, and they certainly raise
popular expectations.
D. Probable Future Policies.
- The willingness of the post-Stalin leadership to revise in-
vestment goals downward and to increase the share of investment allo-
cated to agriculture and housing suggests that a considerable evolu-
tion has occurred in the old Stalinist pattern of unrelenting sacri-
fice of all other sectors of the economy in favor of heavy industry.
The general impact of these changes has been to favor consumption
either present or future. Assessment of the futUre of the Soviet
economy now rests on a judgment of the degree of stability of the
new priority patterns; a determination of the impact upon heavy in-
dustry of simultaneous advances on other fronts (namely, agriculture
and housing); and an estimate of how successfully the Soviet leader-
ship will solve the problem of management of its scarce resources.
Given a continuation of the present Soviet leadership, there
are several reasons for believing that the priorities implied by
current plans will continue. Events in the Satellites in 1956 were
a dramatic reminder that there are limits to the degree to which
popular wants can be ignored. Even before the Satellite uprisings,
Stalin's heirs adopted a general policy of reducing coercion and
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replacing it with incentive measures. More importantly, Khrushchev
has identified himself with 'the new priority pattern, especially its
agricultural aspect. He has repeatedly and emphatically affirmed
the goals of catching up with the US in meat and milk, most recently
as a part of the justification of the purge of the anti-Party group.
Nevertheless, one can only speculate as to the durability of
these priorities in the face of possible continued economic stress.
If the current efforts to stimulate industrial production -- mainly
by managerial reorganization, modernization, and the shift in indus-
trial investment to basic materials industries -- fail to show sig-
nificant results, the present resource allocations will surely come
under review again.
Recent revisions of plans show that one can no longer count
on the subordination of all other sectors to the heavy industry goal.
On the other hand, it cannot be assumed that heavy industry will bear
the entire brunt of any possible further shortfalls in available re-
sources. Even the extreme case of a reversion to Stalinist priorities
by the present, or some other, leadership cannot be ruled out. The
assumption underlying the projections of economic activity in this
report, however, is that presently planned allocations of resources
will generally be continued.
IV. Problems of Economic Expansion.
A. Introduction.
The USSR faces serious difficulties in maintaining rapid
economic growth. The scope of the problems is indicated by the
drastic industrial reorganization which Khrushchev has proposed as
a solution. Gross top-level planning errors and administrative
bungling were clearly responsible for allowing the shortage of raw
materials to reach bottleneck proportions. There is evidence, how-
ever, of more fundamental factors which have developed as constraints
on industrial growth. These factors, which involve rising investment
costs, cannot be quantitatively measured, but a qualitative apprecia-
tion suggests that, with the volume of investment which is now planned
through 1960, industrial growth will be at a somewhat slower rate
than the original plan of 65 percent even after the balance in raw
materials supply has been restored.
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r. The proposed policies for improving industrial performance
are generally in the right direction. But these policies, especially
the administrative reorganization and the heavy reliance on plans
for replacement and modernization of equipment, are new departures.
It is likely that, at best, they will not produce results as fast as
Soviet leadership expects.
B. Immediate Factors Behind the 1956 Shortfalls.
The direct cause? of the current problem of shortages of raw
materials was the failure to complete new capacity in the raw ma-
terials industries rapidly enough to keep pace with the planned rate
of growth of output. The underfulfillment of planned increases in
capacity in 1956 was the climax of poor performance in construction
during the preceding years. Table 2 summarizes the information con-
cerning plan fulfillment in construction of new capacity. These
failures in completions occurred despite the fulfillment of the plan
for volume of investment.
Table 2
Soviet Completion of New Production Capacity and Percentage Fulfillment
of Plans in Selected Industries
Fifth: Five' Year.. Plan and 1956
Percent
Industry_
Fifth Five Year Plan 1956
Iron ore 60 52
Pig iron. 87 Less than 50
Steel 72 50
Rolled steel 56 Less than 50
Coal, 83 Less than 50
Electric power 84 Probably underfulfilled
Cement , I\TA, 30
The construction industry has always been beset by a host of
difficulties. The activity has been fragmented administratively
among some 30 different ministries. The industry has had a plentiful
supply of unskilled labor but a chronic shortage of skilled labor.
It has almost always suffered from inadequate allocations of materials.
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Along with these conditions the overriding emphasis imposed on the
construction enterprises has been the planned voluMe of construction
Put in place rather than completions of projects.- The inevitable re-
sult of this emphasis has been the dispersal of effort among top many
projects, too few of which were completed.
Even with these difficulties, raw materials need not have be-
come a general industrial bottleneck had the planners recognized the
seriousness of the situation a year earlier. Their failure to do so
and to act in time apparently stemmed from a complete breakdown in
communication between the planners and the industrial ministers. Al-
though the ministers of ferrous metallurgy and of coal warned the
Twentieth Party Congress of the need for stepping up completions in
their industries, Saburov rejected their arguments and asserted that
their output plans could be fulfilled.
The real impact of the completion failures is impossible to
measure since we only know the percentage of underfulfillment of
plan without knowing for all industries what the plan was. But
evidently, during the Fifth Five Year Plan, both capacity and,out-
? put increased by considerably more than could have been contributed
by newly constructed facilities. To the extent that this can be done,
the investment cost per unit of increased output is reduced.. The
critical question for future Soviet growth is the degree to which
these investment costs rise or fall.
Soviet past performance and future prospects are discussed
it terms of (1) the trends in the labor force (see C, below) and
(2) trends in conditions affecting investment cost per unit of output
(see D, below). Finally, the support that the proposed industrial
reorganization and the developing pattern of Soviet foreign trade
caa provide in implementing industrial production plans are dis-
cUsSed in E, F, and G, below.
C. Trends in Labor Supply.
1. Over-All Labor Supply.
The extremely low birth rates in the USSR during the war
and early postwar periods will result in reduced additions to the
labor force in the period 1957-62. The quantitative effect of this
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development is shown in Table 3. The category Calculated Labor Force
in Table 3 reflects only those gains in labor supply that are con-.
tributed by population growth. It was computed by applying constant
labor participation rates to the number of persons out of school in
each age and sex class between the ages of 15 and 69 for each year.
Table 3
Calculated Labor Force and Civilian Rmployment in the USSR
1950-62
Millions
'Year
Calculated Labor Force 2/ Civilian Employment 12/
1950
Total
Annual Increment
91.6
? ?
4
83.4
1955
100.0
1.6 c/
90.4
1956
101.7
1.7
93.2
1957
103.1
1.4
94.9
1958
104.5
1.4
1959
105.8
1.3
1960
4106.9
1.1
1961
107.8
0,9
1962
108.8
1.0
100.6
5-Year Increments
1950-55
1955-60
1957-62
8.4
6.9
5.7
7.0
5.7
a. Based on US Bureau of Census projections of Soviet
population by sex and age and on estimated 1956 labor par-
ticipation rates for the age-sex classes aged 15 to 69.
b. From 1950 to 1956, based on numbers of workers and em-
ployees and percentage breakdowns of total employment in
the Soviet statistical handbooks; for 1957, based on planned
number of workers and employees and on the assumption that
all other categories of civilian employment stay constant;
and for 1962, based on the assUmption that the increase in
Civilian Employment equals the increase in Calculated Labor
Force. Civilian Employment excludes workers under 15 years,
hired workers in kolkhoz industry, and 4 few other minor
unreported categories.
c. 1955 above 1954.
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The coverage of the calculated labor force in 1956 is intended to be
approximately complete, including, besides civilian employment,
mili-
tary and security forces, forced labor, unemployment, and uncounted
private employment. The increment to the caMbulated labor force from
1957 to 1962 7.- 5.7 million -- is significantly less than in the 5
years from 1955 to 1960 -- 6.9 million -- Or than from 1950 to 1955 --
8.4 million.
Table 3 also shows the trend in civilian employment.
From 1350 to 1955, civilian employment grew by 7 million, significantly
less than the 8.4 million available from population growth. This dif-
ference could result either from declining participation rates or by
shifts from civilian employment to other activities, such as armed
forces or. forced labor. It appears unlikely that, in the future, par-
ticipation rates will rise again. Developments such as increaSing
urbanization, restoration of balance between sexes, and higher pen-
sions will tend to lower rather than raise participation rates of in-
dividual age-sex classes.
In 1956, however, civilian employment rose by 2.8 million,
and the calculated labor force rose by only 1.7 million. In 1957 the
plan for workers and employees called for an increase of 1.7 million,
but the calculated labor force rose by 1.4 million. Assuming that the
number of kolkhozniki and workers in other nonstate categories remained
the same in 1957 as in 1956, the increase in civilian employment from
1955 to 1957 was 4.5 millionl-or 1.4 million more than the increase con-
tributed by population growth. There is no evidence available of sizable
decreases in forced labor or unemployment, and, as indicated above, par-
ticipation rates probably are not rising. The most likely explanation
of the large increase in employment in 1956 and the planned increase for
1957 seems to be demobilization of armed forces as announced by the
Soviet government.
The large gains,in employment in 1956 and 1957 show that
the economic problems 'inthes&years.were not a result of a decline
in the rate of growth of the labor force. From 1957 to 1962, unless
there is further demobilization, the growth of employment is likely
to be 4a-gteater-than'that_tottribUted by pOptlation:groWth
5.7 'million. This figure will represent a considerable slowdown
the rate of growth from 1950 through 1957.
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2. Allocation of Employment to Actors of the Economy.
Table 4 shows employment in various sectors of the economy
in the past and projections to 1957 and 1962.
Table 4
Civilian Employment in: the USSR) by Economic Sector
1950,'1955-56, and Projections to 1957 and 1962
Millions
Economic Sector
9,50
1957
1956
1957
1962
i
Sta,te and cooperative industry ?
15.6
19.2
19.7
20.1
24.1
Construction
2.6
3.2
3.4
3.7
3.8
Transportation
4.1
5.0
5.3
5.5
6.3
Communications
0.5
0.6
0.6
0.6
0.7
Trade and public dining ?3.4
3.8
3.9
4.0
4.7
Education ???3.8
4.6
? 4.7
4.9
5.5
Health ?2.1?2.6
2.8
2.9 ?
3.4
Other state branches and adminis-
trative apparatus
5.2
5.2
5.4
5.5
5.8
Total state and cooperative
economy 2/
37.3
44.2
45.8
47.2 12/
54.3
2/
Minor groups
0.8
0.5
0.5
0.5
0.6
2/
Total nonagriculture
38.1
44.7
46.3
47.7
54.9
2/
Agriculture (15 to 69 years of age) 1/
45.3
45.7
46.9
47.212/
45.7
2/
Total agriculture (12 to 69 years
of age) 1/ ? ?
47
47'2
11.8.7
48.8 101
46.7
Total civilian economy (15 to
69 years of age) ?83.4
90,4
932
94,9
100.6
a. Official figures for 1950 and 1955-56.
b. Based on a planned increase in the national economy of 1.7 million
workers and employees in 1957. Of this increase, 300,000 were estimated as
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Table. 1I
Civilian-Fmployment in the USSR) by Economic Sector .
1950, 1955-56, and Projections to 1957 and 1962
(Continued)
allocated to state agriculture, based on reported increases in number of,
state farms. The distribution by sector is based essentially on estimated
increases in labor productivity and _production for industry and construc-
tion, with other increases imputed to Other sectors.
c. Based on estimates of labor force increases added by population growth
(.5.8 million in 1956-62), of increases in 1956 and 1957 apparently result-
ing from demobilization (1.4 million) added to the civilian economy, and
of the same number of workers in agriculture (15 to 69 years old) as in
1955. The distribution by sector is based on estimated increases in pro-
ductive activity by 1962 and on population increase. The estimate for
industry is derived as a residual.
d. Pertains to workers of the Party Komsomols Pioneers, and Komsomols
and to private handicraftsmen.
?e. Does not include hired workers in kolkhoz industry; workers 12 to
14 years old; family workers on private plots of workers and employees;
personal and domestic servants; civilian employees of the Ministry of
Defense, the MVD, and the KGB; and military personnel and security troops.
f. Based on (1) official Soviet civilian employment distributions (per-
centage) and (2) demographic data on the number of over-age workers
(60 years old or older) and of under-age workers (12 to 14 years old).
Employment in agriculture fell steadily from 1950 to 1953
and then rose again until by 1956 it was well above the 1950 level.
The projection of agricultural employment (15 to 69 years old) assumes
that by 1962 agricultural employment will be 1.5 million below the
1957 level. The Immediate objective of current Soviet plans for rapid
mechanization of agriculture is to raise output. The ultimate aim is
surely to draw labor out of agriculture. That the indicated reduction
of 1.5 million below 1957 can be achieved by 1962 is uncertain.
Assuming that agricultural employment for 1962 will be
45.7 million, nonagricultural employment amid be 54.9 million in
1962, representing a gain of 15 percent for the 5-year period com-
pared with a little more than 17 percent from 1950 to 1955. The
projection of industrial employment to 1962 is 24.1 million for a
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gain of 20 percent from 1957 to 1962 compared with 23 percent for
1950 to 1955. Thus the prospects are for a reduced growth rate in
the nonagricultural labor force as a whole and in industry even if
it is assumed that 1.5 million workers can be drawn out of agri-
culture.
The labor force projections suggest that maintenance of
the rate of growth of output will depend more heavily on gains in
productivity and efficiency in the future than in the past. This
conclusion is reinforced by the reduction in the workweek from 48 to
?41 hours which is to occur during the period of this estimate. It
must be pointed out that this labor constraint to economic growth
would be mitigated if further demobilization occurs or if the chances
of drawing labor out of agriculture are better than estimated.
IL Trends in Investment Costs.
?
If the entire reduction in planned investment for the period
1956-60 were to be borne by Soviet industry, the amount remaining
still mould be great enouel to support an industrial growth rate
closely approximating that originally programmed for the Sixth Five
Year Plan if it were assumed that the investment-output relationship
of the past 6 years could be projected into the future.* It is doubt-
ful, however, whether Soviet industry will be able to derive output
gains per unit of investment in the future comparable to those obtained
in the period 1950-55.
In general, Soviet industry was able during the period 1950-56
to increase significantly the utilization of its capital stock by in-
creasing the inputs of labor and raw materials partly at the expense
of inventories, by increasing efficiency, by introducing technological
modifications, and by producing a more restricted output than the
variety planned. At the same time, the Niel output goals of the plan
for 1950-55 forced Soviet industry to direct a large share of its in-
vestment resources into activities which would provide the most rapid
gains in output. This policy neglected the replacement of antiquated
and worn-out equipment and failed to provide adequate development of
new sources of basic raw materials. As a result, Soviet industry,
generally, is faced now with fewer opportunities to increase output
without substantial increases in new plant investment and the diver-
sion of a larger share of investment into the more capital-intensive
raw materials industries.
* That is, if it were assumed that the increase In output) measured
in rubles, obtained from a given ruble volume of Investment remained
constant.
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In some Soviet industries, significant increases in the de-
gree of utilization of capital facilities were obtained by increasing
the inputs of labor and materials. In coal, for example, the utiliza-
tion of capacity rose from 84 percent in 1950 to 95.8 percent in 1955)
and in the cement industry utilization of rated capacity increased
from 75 percent in 1950 to 85 percent in 1955. Concomitant with the
increase in utilization the coal industry added 10 times more labor
than was envisaged in the 1951-55 plan, and the cement indUstry re-
duced the amount of "downtime" and increased the Input of raw materials.
Comparable gains in the utilization of capacity will be difficult to
achieve in the future. Zademidko, Minister of the Coal Industry, re-
ported to the Twentieth Party Congress a goal of 97.5-percent utiliza-
tion by 1960) 2j/ but further large increases in utilization achieved
by Increasing the Inputs of labor and materials are less likely to
occur, because of the smaller supply of new labor envisaged for the
future and the increasing requirements of maintenance and repair.
The growing development of a skilled labor) engineering, and
managerial force accompanied by relatively simple changes in shop and
plant layout facilitated the growth of industrial output during the
period 1950-55) eOpecially in machinery industries. Although this de-
velopment was not universal and important gains may still be obtained
from these sources, it appears that the opportunities for such gains
will not be as numerous in the future as during the Fifth Five Year
Plan., nor will they be as easy to obtain.
In some industries, relatively inexpensive technological in-
novations facilitated the achievement of the 1955 and 1956 production
levels. For example, the adaptation of blast furnaces to top pressure
operation increases their productivity by as much as 10 percent. In
many of these instances, however, the most profitable of these gains
have already been adopted (approximately. 67 percent of the available
blast furnace volume had been converted to top pressure by 1955), and
similar increases in production could be obtained only at higher in-
vestment costs.
Another method which probably was employed to achieve the
1955 and 1956 production goals was product, or product mix, deteriora-
tion. In the case of cement, for example, it is possible to obtain
increases in output even at full utilization levels, belt at the cost
of reduced quality. To maintain quality at higher output levels
planned for the future will require a greater amount of investment per
unit of additional output than experienced during the Fifth Five Year
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Plan period. In the case of steel, the production of light sections,
cold rolled strip, and sheet has the effect, generally, of reducing
a given mill's capacity measured in tons. Soviet rolling mills pro-
duced 1.3 million tons of steel more than the 1955 planned level,
but the output of light sections, wire rod, and cold rolled sheet
was underfulfilled. To the extent that failure to produce the
planned product mix was the result of a lack of finishing capacity
rather than a practice followed merely to earn quantity production
bonuses, future increases in finished steel output will require new
investment in finishing plant facilities.
It would appear, then, that in many instances the opportuni-
ties to derive "easy" gains in the future, comparable to those ob-
tained during the Fifth Five Year Plan, are limited.. At the same
time, additional investment costs will result from the need to re-
build inventories and from the expansion of the resource base, prin-
cipally in the Asian areas of the USSR, where overhead costs in the
form of transport, housing, and communal services are high.
The need for a considerable increase in investment in raw
materials was recognized in the Sixth Five Year Plan) and a large
share of planned investment was to go to electric power, fuels,
metallurgy, chemistry, and building materials. Shortfalls experienced
in the production of materials in 1956, although in most cases rela-
tively small, indicated that their investment allocations were too
small, and in the 1957 plan an even greater share of total investment
was directed into the primary materials industries, particularly coal
and steel. Forty-four percent of the increase in nonhousing invest-
ment planned for 1957 was directed to coal and ferrous metallurgy,
raising their share in state investment from 14.7 percent in 1956
to 15.7 percent in 1957. Investment, therefore, is being shifted
into industries where investment costs per unit of output are con-
siderably higher than in industry as a whole. For example, accord-
ing to 1938 data still cited in recent Soviet journal articles, elec-
tric power stations are more than 4 times as capital intensive as
Soviet industry as a whole,* fuel extraction 3 times, and metallurgy
2 times.
At the same time, there has been a tendency for investment
costs to rise in the USSR. In February 1956, V.A. Malyshev, Chair-
man of the State Committee on Technology, severely criticized the
industrial ministries for defending such increases in petroleum
* That is, four times as many rubles of capital investment are re-
quired per ruble of expanded output as the average for Soviet industry.
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refining, steel, nitrates, coal* cement, and steam power. The minis-
tries attempted to justify these rising costs as being outgrowths of
additional byproduct or raw materials processing. Malyshev argued
that the incorporation of new technology would sharply reduce capital
costs per unit of output in many of these cases. Nevertheless, in
certain industries lower quality of resources is raising costs -- for
example, in ferrous metallurgy, lower quality ores require the con-
struction of concentrating and beneficiating facilities which tend to
raise the investment cost per unit of output.
E. Soviet Response to the InvestMent Problem.
To meet the immediate problems of inadequate facilities, par-
ticularly in the raw materials industries, and to attempt to avoid
rising investment costs, the 1957 Economic Plan calls for a concen-
tration of resources on the completion of a substantial backlog of
unfinished construction projects. The completion of these projects
(reported to represent an investment of 150 billion rubles by the
end of 1955) III/ would be a relatively rapid and inexpensive method
of expanding capacity and output. This backlog of unfinished projects,
however, includes many white elephants, such as the abandoned Turkmen
Canal, which are of little present use and of questionable future
value. Furthermore, some Soviet theorists observe that the backlog
may be expected to grow as an increasing part of the investment pro-
gram is committed to projects of 5 to 15 years' construction duration.
Much has been made of the fact that in some cases the redesign
and reengineering of proposed projects will sharply reduce capital
costs per unit of output below those originally, planned. In some in-
stances, there has been a lag of as much as 10 years between the
initial design of a new unit and the initiation of its construction.
For example, some new refineries, construction of which is only now
being started, were designed during the period 1946-50, and these
designs were used .as the basis for iheir cost estimates as carried
in the Sixth Five Year investment plan. The redesign of these plants
and the adoption of new technology reduced the capital costs per unit
of output considerably.** It is not possible to determine the extent
* Coal mine-construction costs are reported elsewhere to have
doubled during the course of the Fifth Five Year Plan.
XX Capital costs of refined oil were reported to have been reduced
from 442 rubles to 343 rubles per ton as a result of the resurvey
of 7 refinery projects. I.J/
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of Obsolescent design in current Soviet planning. It should be noted,
however, that redesign involves delay, expense, and the redundant use
of top engineering talent. It should be noted further that in the
Fifth Five Year Plan the Soviet construction industry consistently
failed to keep construction costs at originally planned levels.
The scope of the replacement and modernization goals is in-
dicated by the plan to replace 25 percent of the national machine
tool inventory and 20 percent of the national metalforming machinery
inventory during the period 1956-60.* It is estimated that this
would absorb slightly more than half the planned 1956-60 production
of metal-autting machine tools and almost 70 percent of the planned
production of metalforming machinery. Obsolete steel-making facili-
ties probably represented 12 percent (5.1 million tons) of the Soviet
crude steel output in 1955.** .5te retirement of thesefacilities,
if it were to take place, would account for nearly one-third of the
new capacity planned for crude steel during the period 1956-60. This
ambitious program to replace such a large volume of existing facili-
ties, if carried out, would undoubtedly have a significant effect
upon the productivity of labor and upon the efficiency of use of ma-
terials.
Successful implementation of the programs for modernization
and automation of Soviet industry would require a large volume of in-
vestment during the next few years. Concurrently, success in these
programs calls for the development of still further skills on the
part of the labor force and a more efficient and effective industrial
management.
Since 1956, however, the distribution of investment has been
significantly altered. Allocations to housing and agriculture have
been increased, so that the shares to transport and industry must
have been reduced. Furthermore, a larger share of investment in in-
dustry is being directed toward the expansion of capacity of the more
capital-intensive raw materials industries. For the rest of industry
* This probably refers to replacing low-productivity or obsolete ma-
chinery in direct production with new models and relegating the old
machinery to repair shops or low-priority work.
** Includes plants which are, in general, completely obsolete. It
does not include many outmoded units at plants which have a large
output but which are not wholly up to modern standards.
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the share of resources available for investment, therefore, must be
less than that originally, scheduled in the 1956-60 plan. This means
that modernization and automation are not likely to be developed
soon enough to contribute to increases in efficiency in the degree
which would have been necessary to meet the original goals prescribed
by the now defunct Sixth Five Year Plan. The automation program al-
ready appears to be behind schedule. The Ministry of Machine Tools
produced only 929 of the 5,192 new-model metal-cutting tools called
for in the 1956 plan. The 1956 plan of introducing into serial pro-
duction the instruments and means of automation was not fulfilled)
and no report was made of the progress of carrying out the Sixth Five
Year Plan goal of 220 automatic and semiautomatic transfer lines in
the machine-building industry, Thus an even greater responsibility)
in increasing the efiliCient utilization of resources, must rest upon
gains in technology and the recently reorganized industrial manage-
ment structure. It Seems unlikely) at the currently planned level of
investment, that improvements in technology and management can be
achieved rapidly enough to affect production significantly before 1960.
F. Problems of Management and of Organization.
The greater the need for increased efficiency in the use of
resources, the greater the necessity for good managemeht andAhe more
obvious and costly the managerial mistakes. The increasing complexity
of the economy and the broadening of the horizon of priorities have
tended to make the problems of coordination of productive activity and
efficiency at the plant level all the more vital. After years of ex-
tolling the virtues of a planned economy) Soviet academicians and
planners have become vitally interested in improving the process of
making economic decisions. Soviet literature is now_replete with
articles offering criteria for establishing an investment program
and with discussions of costing, pricing, and the maintenance of
inventories.
The role of coercion in the operation of the Soviet economy
has been slowly declining since Stalin's death. Since 1953, there
has been a long succession of measures in both economic policy and
administration designed to increase worker, peasant, and managerial
incentives. The most striking of these was the reorganization of
the industrial structure promulgated under the aegis of Khrushchev
in the spring of 1957. The majority of the economic ministries,
which had been the basis of Soviet industrial administration since
the initiation of full-scale planning) were abolished, the major
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survivors being the defense industry, chemicals, transportation, and
electric power, In their stead, 105 regional economic councils were
established, in which were lodged operational control over all indus-
trial and construction activities in their respective areas. In those
union republics in which more than .a single economic region exists,
intermediate planning responsibilities devolve upon republic Gosplan
organizations. The main planning function, however, still resides
with the Gosplan of the USSR. Thus the reorganization attempts to
increase efficiency by decentralizing industrial administration and
at the same time to retain central determination of basic economic
policy and basic control over the economy.
Whatever illusions may exist, the Soviet leadership expects
significant gains from the reorganization in terns of more efficient
utilization of resources and improvement of managerial efficiency at
the plant level through stimulation of local initiative. By estab-
lishing a more intimate relationship between producer and consumer,
it is hoped that the producer will become more sensitive to market
demands, particularly important in the case of construction and of
production of consumer goods; Emphasis upon the use of local re-
sources is intended to minimize the burden on transport facilities.
Local administration of economic operations should minimize wasteful
duplication of effort, obviate vertical integration, and avoid con-
struction of similar facilities by different organizations. The means
by which managerial initiative at the plant level will be stimulated
is less clear, although it is reported that managers have been granted
unspecified additional decision-making authority.
The substitution of a regional structure of administration
for a ministerial structure will bring problems of its own. Exces-
sive ministerial self-sufficiency may be replaced by a tendency to-
ward excessive regional autarky. Since many of these regions are
based on union republics of distinct minority nationalities, local
loyalties conflicting with national objectives may enforce the ten-
dency toward regional autarky.
G. Impact .of Foreign Trade upon Soviet Economic Development.
In a time of anticipated domestic labor shortages and of
material shortages, an increase in foreign trade could be of in-
creasing economic advantage tO the USSR. But much of the national
economic advantage from future trade with the most important trade
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partners of the USSR, the European Satellites, has been lost in re-
cent Soviet trade concessions designed to bolster the sagging Satel-
lite economies which had been overburdened by past Soviet exploita-
tion. Foreign economic relations are thus a mixed blessing to Soviet
domestic economic policy.
The rapid expansion of the Soviet economy has required an
ever-increasing consumption of natural resources and of power.
Pressure against the supply of raw materials has been indicated by
price movements since 1948; in July 1955) machinery prices averaged
40 percent lower than in 1948, but prices of raw materials and power
averaged 20 to 24 percent above 1948. Although the USSR has been
compelled to embark upon a costly program of resource development in
its remote Asian areas, there will be a parallel tendency to increase
the exchange of manufactures for raw materials in foreign trade.
Thus the share of machinery and equipment in total exports increased
from 5 percent in 1938 to 24 percent in 1955. Conversely, although
imports of machinery and equipment have maintained a high level
(35 percent of all imports in 1955), the share of ores and concen-
trates in the rapidly expanding total imports has risen from 1.7 per-
cent in 1950 to 11.1 percent in 1956. 2...Y
In today's world) there is fierce long-term competition by
all industrialized countries for supplies of raw materials. The
Soviet Bloc has entered into this competition by negotiating attrac-
tive trade agreements with the so-called underdeveloped countries
of the Free World whereby it assists in their economic development
in exchange for return shipments of foodstuffs and raw materials.
As with domestic Investments of a similar nature, several years must
elapse before returns on developmental outlays can be expected.
During this period, foreign trade with underdeveloped countries will
constitute a small net drain on the Soviet economy. The concentra-
tion of the program, however, in countries such as Egypt, Afghanistan)
and India implies that political motivations must have played a
dominant role in Soviet willingness to assume the initial costs of
this type of trade relationships. Once the necessary developmental
costs have been incurred, the resulting flow of foodstuffs and raw
materials should make a positive contribution to Soviet economic
capabilities.
Although the Soviet aid to underdeveloped countries arouses
much interest, I. rubles out of every 5 spent outside the Bloc by the
USSR go to Western Europe. Greatest interest is expressed in the im-
portation of machinery as prototypes for design of Soviet production
models.
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Developments in foreign trade with the European Satellites
have been unfavorable to the USSR since the fourth quarter of 1956
Generally, since that time, the USSR has had to increase the level
of its exports significantly, but the total return flow of goods
has grown slightly if at all.
In1957 the USSR expects to increase intra-Bloc trade by
13 percent, or 2.5 billion rubles, and to bring the total value of
this trade to about 23 billion rubles. Most of the increase in
trade turnover will be in the nature of an increase in Soviet ex-
ports to the European Satellites as a result of the supplementary
credit and trade agreements of late 1956 and 1957. About one-third
of these suppleplentary exports will be in grain shipments, and much
of the remainder will be in scarce industrial materials such as
steel, coal, oil, iron ore, and nonferrous metals. Imports of ma-
chinery and equipment from Czechoslovakia and East Germany will be
increased; imports of coal from Poland and of oil from Rumsnia will
be reduced. At a time when Soviet production of coal, iron ore,
and steel is lagging, the European Satellites are increasing theit
drain upon Soviet availabilities of these commodities.
The greatest contributions which foreign trade could IP:Ike
to the economic capabilities of the USSR within the period of this
estimate would be to improve the Soviet domestic availability of
industrial and agricultural raw materials and specialized process-
ing equipment for basic industry. Recent Soviet commitments to-
assist the Satellites and the necessity to undertake developmental
investment in underdeveloped non-Bloc areas make it uniikely that
there will be any major increase in the contribution of foreign
trade to the Soviet economy for the next Several years. By the end
of the period of this estimate (1962), trade flows could become more
favorable.
V. Probable Courses of Action and Growth Projections.
A. Introduction.
Projection of the course of the Soviet economythrouel 1962
is attended by more than the usual degree of uncer6ainty. It is.
difficult
difficult to assess the outcome of various new policies such as the
administrative reorganization of industry and construction, the
plans for modernization and reequipment of industry,'and the plan
for raising productivity in agriculture by mechanization. In
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addition, the priorities of the leadership appear to have shifted
slightly in the direction of consumption. The extent and permanence
of this shift are uncertain. Developments in the Satellites, which
cannot be predicted, may have a.serious effect on Soviet economic
?
plans, as they did in 1956. Furthermore, the dominant Soviet leader,
Khrushchev, with his strong predilection for experimentation and in-
novation, adds more uncertainty to assumptions regarding future policies.
The abandonment of-the revised Sixth Five Year Plan and the
announcement of a Seven Year Plan to run through 1965 add to the com-
plexity of anticipating the future course of the Soviet economy. Pro-
"ceeding, however, from the analysis of priority patterns and capabili-
ties discussed above, the paragraphs below list the future policy
trends which appear most probable.
The highest priority, objectives are still defense and economic
growth. Consumer-oriented industries, however, have been elevated on
the priority scale. Higher minimum wages, pension and welfare
measures, and higher prices paid by the state for agricultural pro-
duce Will make it more difficult to continue to reduce the consumption
share of national income. Flexibility to cut back consumer-oriented
expenditures in order to alleviate temporary difficulties in heavy
industry has been reduced. It is assumed that the moderately in-
creased priority for consumption will continue through the period of
this estimate. Reflecting this priority, the projections are based
on the reduced investment which has been unofficially rannounced and
on the implied reallocation of this investment to various sectors.
Specifically, it is assumed that most of the reduction will be tmade
at the expense of iridustrial productive investment. It is also
assumed that savings from demobilization will be more than offset by
the rising cost of modern weapons systems and that defense expendi-
tures as ?a share of GNP will remain about the same.*
Despite the strain of competing demands and long-run trends
tending to reduce capabilities, the Soviet leaders will continue to
drive the economy at a rapid pace in order to- "catch up with the US."
It is therefore estimated that the Soviet leaders will endeavor to
return to an average annual rate of growth of industrial output of
at least 10 percent in 1958-60. This would result in an over-all in-
crease of about 60 Percent for the period 1956-60.
* This statement shOuld. be considered tentatiVe pEnding receipt and
processing of the latest military estimates frOM the service intern-
gene agencieS.
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Khrushchevy apparently committed strongly to the seemingly
impossible objective of catching up with the US in per capita pro-
duction of dairy products by 1958 and in meat production by about
1962 or 1963, will continue to be relatively generous in allocating
labor and investment to agriculture in an effort to approach these
goals.
It will become increasingly difficult for the Soviet economy
to meet all of the objectives originally announced for 1960. Given
the present allocations to investment and defense, the USSR will make
some progress toward "'catching up with the US" during the next 5
years, but less progress than .is implied by recent Soviet policy state-
ments.. The absolute gap between the US and Soviet' economies will
widen slightly, although by 1962, at present relative rates of growth,
the percentage difference between the two economies will narrow. It
will be difficult for the Soviet leadership to maintain desired rates
of industrial growth and still satisfy rising consur-..:w;)ectations
and the pressing need for more housing and urban services. At some
small economic sacrifice, it is expected that the Soviet leadership
will continue the program of economic penetration of underdeveloped
nations because of the potentially large political returns. The
economic cost' of maintaining the Soviet empire in Eastern Europe prob-
ably will continue to rise.
If, as it is estimated, the Soviet economy becomes increasingly
hard put to meet all the demands placed upon it, the resultant strains
may lead to serious policy disputes among the Soviet leaders during
the next 5 years just as during the past year, .This could be a source
of political instability in the top-leadership during the period of
this estimate.
B. Projections of Future Growth.
1. Estimated Growth of Gross National Product, 1957-62.
During the period of the Fifth Five Year Plan (1950-55),
Soviet GNP grew by 39.0 percent, or at an average annual growth rate
of 6.8 percent -- compared with the GNP growth rate in the US of
4.1 percent for the same period (see Table 5*). It is estimated
that the rate of growth of, Soviet GNP will decline somewhat in the
future compared with the exceptional growth in 1956, when the extraor-
dinarily good harvest helped boost the growth of Soviet GNP to
.57 Table 5 -follows on p. 33.
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8.9 percent over 19557 For the period 1957-62 it is estimated that
the average annual rate of growth will be 6.0 to 6.5 percent, result-
ing in an increase of 41 to 44 percent for this period.
.
Table 5
Distribution.of Soviet Gross National Product at Factor Cost.
by Eno. Use, in the USSR and the US
1956 -.
USSR
(1,063 Billion 1955 Rubles)
Percent
Consumption
59
Investment
26
Defense 2/
12
Administration
3
. Total 100
US
(378 Billion 1956 Dollars)
Percent
Consumption
66
Investment
20
Defense
11
Administration
3
Total
100
a. Does not include foreign aid Or stockpiling., as in the
US.
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Investment, even with the proposed downward revision,
will rise somewhat faster than GNP as a'wholeand hence will be a
larger share in 1962. It iS asauthed that the defense share may be
about the same and that consumption will command a slightly smaller
share of available resources,
The principal improvements in consumption will be in the
form of better diet and more housing. Although Khrushchev's goals
for meat and dairy products are considered utopian, the increase in
production of animal protein and dairy foods amticipated for the
period will permit a considerable improvement in the diet of most
citizens. The recent housing decree reaffirms and to some extent ex-
tends the promise of more living space per capita contained in the
original Sixth Five Year Plan directives. 11/ The decree does not
increase the amount of living space to be built from state invest-
ment allocations, but it allocates 35 billion additional rubles of
investment funds to housing to make up for the anticipated failure
to reduce housing construction costs by 20 percent as originally
planned. Furthermore, the decree commits the regime to make avail-
able for private purchase a substantially larger share of scarce
building materials than was originally planned in order to support
the planned increase in construction of housing by private individuals.
Assuming that the construction goals for state and co-
operative housing and for individual housing are fulfilled, the amount
of floorspace -- net of retirement -- available to the urban popula-
tion in 1960 is presented in Table 6.* Even this generous assumption
does not give the ordinary urban dweller much more floorspace than he
had in 1926._ Hence widespread dissatisfaction with crowded housing
conditions will not be greatly lessened by the revised program. The
regime.will_find it difficult to avoid further increases in housing
allocations, particularly as the reduced role of coercion makes hous-
ing availabilities a very important element in the allocation of labor.
2. Comparison of Gross National Product in the USSR
and the US.
These projected rates of growth for Soviet GNP will in-
crease the size of the Soviet economy relative to the size of the
US economy (measured in GNP). Thus Soviet GNP in 1950 was 32.7 per-
cent of US GNP, whereas in 1955 it was 37.2 percent of US GNP (see
Table 7**). It is estimated that in 1962 Soviet GNP will rise to
about 47 percent of US GNP, although the absolute gap will widen slightly.
* *
Table 6 follows on p. 35.
Table 7 follows on p. 35.
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Table 6
Housing Space in Urban Areas of the USSR Per Capita
Selected Years 1926-60
Total Floor-
Year Ifrban Population HIOtal Floorspace Spate per Capita
(End of Year) (Millions) (vii4ioncivare Meters) .(Square meters)
1926
26.3
216
8.2
1950
71.4
513
7.2
'
1955
86.6
640
7.4
1956
87.1
668
7.7
1960
101,9
:937[
9.2
a. Assuming that the construction goals for state and cooperative housing
and for individual housing jare fulfilled, the fund of total floorspace by
the end of 1960 was derived by applying the rate of retirement of the 1950
fund over the period of the Fifth Five Year Plan to the fund as reported
for the end of 1955.
.T.al)I.e 7
Comparison Of Gross National Product at MarketpriCea USSR and: US
Selected.Years, 195062 '
i Bi1lion,1955US Dollars
1950
1956
1962
1962
USSR
105
,1955
146
159
226 2/
23212/
US
321
392
403
487 q/
487 2/
USSR as percent of US
33
37
39
46
47
a. 6.0-percent rate of growth, 1957-62.
b. 6.5-percent rate of growth, 1957-62.
c. The growth rates of 3.0 percent per year between 1956 and 1960 and of
3.7 percent per year between 1960 and 1962 are based on estimates of the
Joint Economic Committee, Potential Economic Growth of the United States
During the Next Decade, US Government Printing Office, 1954, p. 35.
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The picture is somewhat different, however, when the.
principal end-use components of GNP are compared on the basis of
ruble-dollar conversion ratios In 1956 the Soviet economy was
about 4o percent of the size of the US economy,: measured In terms
of GNP. But the absolute level of Soviet ?defense expenditures was
approximately equal to US defense expenditures, and Soviet invest-
ment expenditures were approximately 57 percent as large as US
investment expenditures. In the USSR, however, a higher portion
of investment goes to heavy industry and proportionately less to.
light_industrylhousing, and Services. On the other hand, Soviet
consumption expenditures were only about. 30 percent the size of
US outlays, despite a population about 20 percent greater.
3. Projections of Industrial Growth.
If the planning errors which led to the serious imbalance
between capacity and production goals in the basic materials industries
had not. occurred, the original goal for a 65-percent increase in indus,
trial production in 1960 above 1955 might have been achieved despite
the shifts in the priority patterns-and the reduced rates of growth
of the labor force and investment resources. As in the past, the 65-
percent goal may have been rounded down somewhat to facilitate over-
fulfillment. But it now appears that growth of the basic materials
industries probably will not be rapid enough to support a 65-percent
growth of industrial output for the 5-year period. Even after the
restoration of balance between the growth rates of basic materials
and the rest of industry, other factors, suCh as more slowly growing
labor force and rising investment requirements, will operate as con-
straints,: Itsis.cOncluded, therefore, that the. rate of growth in
1957-62 will be between 9 and 10 percent per year, which will result
in an increase of 55 to 60 percent for the period.
It is estimated that the growth of labor productivity
probably will not exceed 7 percent per year for the period 1956-62
and may decline slightly to about 6 percent per year if the intro-
duction of_new_technology continues to fall behind schedule._Instead
of the planned increase of 50 percent for industrial labor produc-
tivity in the period 1956-60, a range of 39 to 44 percent is esti-
mated. This means that increments to the industrial labor force will
have to be substantially larger than planned in order to offset the
effect on production goals of the shortfall in labor productivity
goals.
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It is estimated that the reduction in investment in in-
dustry during the period 1956-60 will absorb most of the reduction
in the total invkstment bill. Furthermore, it is quite likely that
a share of industrial investment larger than originally planned will
be allocated to "nonproductive" uses -- that is, housing and communal
facilities. Investment in basic materials and energy industries also
probably will be more than planned. It is assumed that the amount of
investment estimated to be available will support an increase of 55 to
60 percent In industrial output.
? 4. Projections of Agricultural Production.
It is estimated that, agricultural production will increase
15 to 20 percent in the period 1957-62 above 1956 and that, if 1956
output were deflated to "normal" weather conditions, an increase of
about 25 percent for the 5-year period is possible. This estimate
is based on the assumption that expansion of the sown area during
the period 1957-62 will not proceed as rapidly as during the period
1953-55. A recently announced plan would bring under cultivation an
additional 12 million to 15 million hectares of land during the next
2 years compared with the addition of about 30 million hectares in
1953-55. Furthermore, the excellent weather of 1956 will not be a
common phenomenon. Although the growth of agricultural production
will be far less than planned, it will be sufficient to provide some
improvement in the national diet.
State investment in agriculture for the period 1956-60
will be at least the 120 billion rubles originally planned. In
addition, investment from collective farm funds will be much higher
than in the past. A considerable portion of state investment is in
the form of agticultural machinery. By 1960 the grain combine park
is scheduled to more than double to 890,000 units, the park for corn
and ensilage combines to grow fourfold, and that of windrowers about
10 times. Inventories of tractor plows, cultivators, and drills
should increase substantially. The immediate effect of these machinery
Investments is to raise output, but by the end of the period of this
estimate they will have to be restructured so as to facilitate the
movement of labor out of agriculture.
Calling upon the USSR to match U.S per capita production
of milk and butter by 1958 and of meat by 1960-61, Khrushchev raised
the meat target from a goal of doubling output between 1955 and 1960
to one of achieving more than 3 times the 1956 output by 1960. 116/
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The original 1960 milk production goals -- an increase of 95 percent
over 1955 -- apparently are to remain the same. It is believed that
these goals will not be achieved by a wide margin and that actual pro-
duction will approximate the levels indicated in Table 8. The prin-
cipal reason for such a wide gap between planned and estimated actual
production is that there simply will not be sufficient feed available
to support such increases. It is estimated that Khrushchev's program
would require an amount of feed equivalent to 344 million to 386 million
metric tons of shelled corn. But the amount of feed expected to be
available from all sources -- grains, potatoes, silage, root crops,
and the like -- will amount to the equivalent of only about 212 million
metric tons of shelled corn, or less than 60 percent of the amount of
feed believed necessary to meet Khrushchev's production goals for meat
?and milk.
Table 8
Production of Meat and Mak in the uspll
Selected Years,.1950-60
Million Metric Tons
produotion FigureP Apparently USed by the .ppR
1950
1955
1956
1960 Goals
Meat
4.9
6.4
6.5
20.1
Milk
35.3
42.1
49.1
82.0
Estimated Actual Soviet Production
1960
1950
1955
1956
(Theoretical Maximum Pi
Edible meat
3.4
4.4
4.5
12.5
Milk
31.2
37.2
43)4
50.8
a, 1960 theoretical maximum achievements are based on a
proportional utilization of maximum food .units available
.and should not'beregarded as forecasts
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Khrushchev's optimism may be related to the record 1956
grain harvest and its positive effects in 1957 on the production of
livestock products. It is noteworthy that no new plans for additional
resource allocations to agriculture were announced in connection with
the recent livestock goals. On the other hand) Khrushchev's personal
commitment to the agricultural program indicates that the current
relatively high priority of agriculture will continue at least as long
as Khrushchev is a political force.
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APPENDIX A
STATISTICAL TABLES
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Table 9
Comparison of Production of Selected Industrial Products in the US and the USSR*
1948 and 1956
Product
Energy
Unit
1948 Soviet Production 1956 Soviet Production
as Percent of as Percent of
1-113. USSR US Production US USSR US Production,
Hard coal
Million metric tons
593
150
25
479 -
302
Lignite
Million metric tons
3
58
1,933
3
127
Coal; total
Million metric tons
596
208
35
2
429
Electric power
Billion kilowatt-
hours
355
66
19
724
192
Petroleum
Trillion British
thermal units
18,060
1,400
8
26,000
41000
Metals
Finished steel
Million metric tons
63
14
22
76
38
Refined copper
Thousand metric
tons
1;201
187
16
1,550
413
Aluminum
Thousand metric
tons
566
lo4
18
1,524
362
Footnotes for Table 9 follow on p,
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63
4,233
89
27
15
50
27,
24
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Comparison
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Table 9
of Production of Selected Industrial Products in the US and the USSR
1948 and 1956
(Continued)
Product
Fabricated metals
Unit
1948
Us USSR
Trucks
Thousand units
1,364
174
.Turbines
Thousand kilowatts
4,559
1,200
Generators
Thousand kilowatts
7,394 11/
820
Power transformers
Thousand kilovolt...
amperes
24,9951)1
6)100
Chemicals
Synthetic ammonia
Sulfuric acid
.(100 percent
basis) .
Synthetic rubber
Thousand.metric-
tons
Thousand metric
ton8
Thousand metric
989
10 ,393
356
1,590
tons
498
90
Manufactured consumer
goods
Cotton fabrics
Million meters
6,197
3,150
Leather footwear
Million pairs
462
134
43-
Soviet Production
as -Percent of
US Production
1956
US USSR
13 1,200 358
26 9,384 21 5,800
11 9,384 6,600
24 52,446 A/ 22,300
36 3,027'sli 853
15 14,5381/ 4,323
18
Soviet Production
as Percent of
US Production
30
62
70
43
28
30
51.
9,232
5,500
6o
29
586
288
49
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Table 9
Comparison of Production of Selected Industrial Products in the US and the USSR
1948 and 1956
(Continued)
Prod:I-let
Transport
Rail
Unit
Billion ton-kilo-
meters
1948 Soviet Production
as percent of
US USSR US Production
1956
931 468 50 1,040 1/ 1,076
Soviet Production
as Percent of
US Production
103
a. Preliminary
b. 1947.
Preliminary
Prliminary
estimate; excludes ship turbines.
estimate; excludes diesel-generator sets.
estimate.
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Table :10
Estimates of Production of Seleated Products of Heavy and Light Industry in the USSR
?
- -.Selected Years, 1950-57
PrOd1.1ct:
Heavy industry
Energy
Unit
1.950 1955 1956 1957
Coal, hard and lig-
nite
Million metric tons
261
391
429
463'
Electric power
Bill*On kilowatt-hours
91
170
192
210
Crude petroleum
Millionnetric tons
38
84
98
Metals -
Finiehed steel
Million metric tons
21
35
38
4o
Refined copper
Thousand metric tons
247
377
413_
Aluminum
ThouSarid metric tons
120._
335.
362
Fabricated metals
? Trucks
Thousand units
294
329
358
372
? Tractors
.
Thousand units
log
163
184
204
Machine tools
Thousand units
? 71
118
121
Freight cars
Thousand 2-axle-equivalent Units
102
69
80
Chemicals
Synthetic ammonia
Thousand metric tons
425
753
853
Sulfuric acid
(100 percent basis)
Thousand metric tons
2,125
3,798
4,323
4,600
Synthetic rubber
Thousand MetriCtOris.,
143
240
281
323
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Table 10
Estimates of Production of Selected Products of Heavy and Light Industry in the USSR
Selected Years, 1950-57
(Continued)
P17,6414t
Heavy industry (Continued)
Construction materials
Cement
Bricks
Light industry
Processed foods
Unit 1950 1955 1956 '957
Million metric tons
Billion units
Flour Million metric tons
Granulated sugar Thousand metric tons:
(raw Weight)
Consumer durables
10 22 25 29
10 21 21 24
34 38 4o
2,523 3,419 4,354 4,19l
Television receivers,
civilian Thousand units 10 550 700 700
Manufactured consumer
'goods
Cotton fabric
Leather footwear
Million meters 3,900 5,900 5,500 5,600
Million pairs 203 274 288 308
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Table 11
Indexes of Aggregate and Per Capita Household Consumption in the USSR
1948-62
.955
1Q0
Item
1248
1949
1.950
1951
1252
1253
1954
120.
19516
1957
1958
1959
1960
1961
1962
Aggregate consumption
59.1
64.2
71.5
75.1
80.2
89.1
97.7
100
110.2
116.2
122.8
130.8
138.1
144.7
151.6
Food
67.9
72.3
77.7
79.7
86.0
92.9
98.8
100
111.1
114.7
119.8
125.0
129.7
134.1
138.6
Nonfood
31.5
39.4
53.2
60.0
63.5
78.7
96.6
100
111.5
124.0
135.0
150.0
165.0
178.0
191.0
Services
68.7
71.4
75.5
80.4
83.9
90.3
95.0
100
104.8
110.2
116.1
122.7
128.8
134.5
141.1
Housing and utilities
81
84
86
88
91
94
97
loo
104
108
114
121
128
136
145
Population
89.3
90.4
91.9
93.5
95.1
96.7
98.3
100
101.7
103.4
105.2
107.0
108.8
110.7
112.5
Per capita consumption
66.2
71.0
77.8
80.3
84.3
92.1
99.4
100
108.4
112.4
116.7
122.2
126.9
130.7
134.8
Food
76.0
80.0
84.5
85.2
90.4
96.1
100.5
loo
109.2
110.9
113.9
116.8
119.2
121.1
123.2
Nonfood
35.3
43.6
57.9
64.2
66.8
81.4
98.3
loo
109.6
119.9
128.3
140.2
151.7
160.8
169.8
services
76.9
79.0
82.2
86.0
88.2
93.4
96.6
100
103.0
106.6
110.4
114.7
118.4
121.5
125.4
Housing and utilities
90.7
92.9
93.6
94.1
95.7
97.2
98.7
loo
102.3
104.4
108.4
113.1
117.6
122.9
128.9
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C-0-.N.-F- I-D-EN-T-I-A-L
APPENDIX B
-METHODOLOGY
Revised ORB Index of Soviet Industrial Production
The statistical handbook, Soviet Industry, 12/ published in the
spring of 1957, ,provides a -considerably: larger sample of physical
production data for industrial products than the USSR has previously
released in the Postwar period. Using this extended sample as a base,
the ORB estimated index of production has been recompUted. The new ?
estimate is that Soviet industrial production for 1955 lies in the .
range of 165 to 175 (1950 100) and is somewhat lower than the for-
mer ORB estimate of 178 for 1955.
? Within the ORB index the sample of products for each industry
is '1;4'eighted-by,1955 priCesand:iiidustries,and major sectors are
weighted by-1955 value added. The index is designed to be comparable,
insofar as data will permit, with the Federal Reserve Board value-
added, weighted index of US industry.* The Soviet official index is
a gross value index and hence is not comparable to the Federal Reserve
Board index The Soviet index is subject to biases of unknown magni-
tude arising from new product pricing and double counting.
The industries for which the production sample has been extended
by the new data are machine building, chemicals, and construction
materials. The revised indexes for these industries are lower than -
the former indexes (except in the case of paper, which formerly was
included under forest products) and very much lower than the corres-
ponding .Soviet indexes (see Table 12**). The new sample is still in-
adequate in several respects. Production data for military end items,
electronics, and the bulk of electrical machinery are missing. from
the handbook. Furthermore, intermediate products, including spare
parts, are not reported. The machinery items for which data are
given are frequently broad categories covering a considerable range
of size and complexity -- for example, machine tools are divided into
Only 17 categories. Production data reported in terms of number of
machines of broad category tend to conceal increases in size and com-
plexity. In many kinds of machine building, such as machine tools
* Electric power, however, is in the ORB index but not in the Federal
Reserve Board index.
* *
Table 12 follows on p. 51.
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and metalforming tools, there has been a rapid increase in complexity
in the USSR. Some of these increases in complexity would consist of
the inclusion of an increasing number of intermediate products in
final products, and hence intermediate products should be included in
the index as they are in the Federal Reserve Board index for US in-
dustry.
Because of the inadequate measurement of changes in complexity
in the ORB index, a range was estimated for the machinery index. The
low index .consists of the handbook sample plus ORR estimates of mili-
tary end items). electronics, and shipbuilding In the high index,
Soviet official indexes for machine tools, metalforming tools, and
tractors were substituted for the corresponding physical production
samples from the handbook, The high index assumes, therefore, that
the Soviet official indexes in these particular industries more
nearly reflect increases in complexity.
? Ranges have been similarly estimated for chemicals, ferrous metals,
and forest products. In these industries the physical production
sample consists primarily of raw materials or intermediate products
which do not reflect increasing complexity of final products.
The revised ORB, index of processed food is based on commercially
processed foods data which was provided in the recent retail trade
statistical handbook. 22/ In previous ORB indexes the food industry
was based on all food products inbluding home processed foods. The
resulting index for 1955 -- 162 --is considerably higher than the
old index -- 127. The revision was undertaken in order to make the
index of Soviet food industry more comparable to the Federal Reserve
Board index.
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IN
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Table 12
Estimated and Official Soviet InduStrialProduction Indexes
'1955
1950 = 100
1955 Value-Added Weights
Raw materials
Sector
Weights
Division
Weights
Estimated Index
Official Soviet
Index PI*
Electric power
6.8
187
187
Solid fuels
18.6
149
150 12/
POL
9.7
192
187
Ferrous metals
14.0
169
179/
Nonferrous metals
7.4
197
195
Forest products
21.7
125
146
Paper
3.6
155
172
Chemicals, including
synthetic rubber
7.5
165
228
Construction materials
10.7
209
229
Total raw materials
100.0
46.3
160
160 to 172
Consumer goods
Processed food
37.6
162
160
Soft goods
62.4
157
178
Total consumer goods
100.0
2008
159
Machinery
32.9
171 to 200 I/
220
Total industry
100.0
165 to 175
185
Footnotes for Table 12 follow on p..52,.
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Table 12
Estimated and Official Soviet Industrial Production Indexes
1955
(Continued)
a. Coverage of categories in the Soviet index is not precisely known and hence is
not fully comparable with that of the ORR index.
b. Coal.
c. Petroleum.
d. Includes ore extraction.
e. Range with complexity adjustments for chemicals ferrous metals, and forest
products.
f. Range with complexity adjustments.
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