SOVIET PLAN FULFULLMENT MID-YEAR 1955

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• Document Page Count: 62
• Document Creation Date: November 9, 2016
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• Sequence Number: 1
• Publication Date: December 30, 1955
• Content Type: IM

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INTELLIGENCE MEMORANDUM
SOVIET PLAN I-ULFILLMENT
MID-YEAR 1955
CIA/RR IM-422
30 December 1955
WARNING
THIS MATERIAL CONTAINS INFORMATION AFFECTING TBE
NATIONAL DEFENSE OF THE UNITED STATES WITHIN THE
MEANING OF THE ESPIONAGE LAWS, TITLE 18, USCI SECS.
793 AND 794, TBE TRANSMISSION OR REVELATION OF
WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS
PROHIBITED BY LAW,
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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CONTENTS
Summary and Conclusions . (WV b ***** ? 4
Page
1
I, Introduction . . . a 4 ? a ,r a 4 0 ? a 4 ? a 4 ? ? 4 4 a
5
II, Industry . 4 ?? 4 *????????? ? 4 a 4 I ? ???
6
A. Trends in Production a. . IV a all 11 ? 0 4 ? a 4
6
B . Heavy Industry . . . a a V* 4 a V V a ** %a V $
11
? 4164,? ?
1. Basic Material and Service Inputs. a
11
2. Engineering Industries .....?. ,? . .
17
C. Light Industry If ? M gh t aV a 4 a 4
23
Capital Investment ? . 4.
24
IV. Industrial Labor Force and Labor Productivity . 4 *a
.27
A. Current Trends . . . . . . . . . . ? ,?? r ty 4 ?
27
B. Future Problems and Policies . . . OOOOOOOO
34
V. Cost Reductions and Technological Progress 4 ?Vial
39
A. Cost Reductions and Investment Surplus a V a 4 a W ?
39
B. Efficiency Measures . . . . . . . . . ? . ? 4 4 a?
43
VI. Agriculture ? . a 4 a a 4 a* 4 4 a ? a a W. 4 a ? ? a a 4
45
VII. Trade and Consumption . 4 4 IF t? 4 Vaal 4 ?
47
A. Trends in Retail Trade . . . . OW *VW
47
B. Trends in Consumption Availabilities from
Production 4 4 a 4 444 4 ? ? ? 4 ? ???
49
C. Investment in Trade Activities a * 4 V 4 ? 4 $
50
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VIII. Transport . .
A.
B.
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Trends in Goods Haulage .
??????????
Transport Investment . . . ? . ?
Source References . .
1. Increases in Gross
1951-5 .
Appendix
alas ........ I
Tables
* U *
Industrial Production in the USSR,
4f 9 4?110
2, Cumulative Indexes
1952-5
0 4
4.
Ir?ai I VII ea
of Industrial Production in the USSR,
....... 4
3. Increases in Production of Selected Basic Industrial.
Materiels in the USSR, 1951-55 . ea ??? ? a a * ?
4. Increases in Production of Selected Industrial
in the USSR, 1951-55 . . ...
..
5. Volume end Financing of Capital Inves
1951-5
End Items
4 ??? U S I I 0-
ent in the USSR,
?14aaaama I jt 45,0554.
6. Annual Increases in the Productivity.
Labor in the USSR, 1951-55 . .
Construction
I II I ? N S a.*
Increases in the Industrial Labor Force and of Industrial
Labor Productivity in the USSR, 1951-55 . .... ? .
8. Indexes of Labor Productivity in Selected Industries in
the USER, 1940 and. 1954. ? ?9??? .....
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Page
9. Comparative Indexes of Average Output per Worker in
Selected Ferrous Metallurgical Plants in the USSR;
1954 . . . ???????#1??#????[#?## 34
10. Nonagricultural Employment in the USSR, 19.6-6O . ? ?? 35
11. Total Labor Force in the USSR, 1950 to 1 January 1956 36
12. Reduction in the Total Cost of Industrial Production in
the USSR, 1951-55 ? . ? ? ? ? ? 4 al ? 4 4 4. ? 4o
13. Trends in the Formation and Use of the State Surplus in
the USSR, 1950-55 ? ? ea ? ? 4 ????al 4 4 42
14. Turnover Tax as a Proportion of State Surplus in the
USSR, 1950-55 . ? . . . . ? . . ? . 42
15. Trends in the Improvement of Production Efficiency in
Certain Key Industries in the USSR, 1951-55 44
16. Trends in Retail Trade Tux-mover in the USSR . . ? 4 48
17. Trends in Availability of Consumer Goods from Current
Production in the USSR , ? 40 4 4.? ...... 4. 50
18. Trends in Transport Activity in the USSR . . . . 52
19. Trends in Production of Transport Rolling Stock in the
T.TSSI10 Mulf 4 IP UP** ? 11- 4 0 aP 4 54
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CIA/RR IM4i-22
(ORR Project 1)-i-838)
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SOVIET PLAN FULFILLMENT*
MID-YEAR 1955
Summary and Conclusions
Soviet economicprogress should be assessed, for intelligence
purposes, from two divergent points of view that of the Soviet
leaders and that of the great mass of Soviet citizens. If the pro-
gress of the Soviet economy at mid-1955 is assessed from the point of
view .of the Soviet leaders, it must be concluded that they had. better
reason than the Soviet citizen to be pleased with the improved. per-
formance of the Soviet economy since the end of 1954.
Gross industrial production already had exceeded (in May 1955)
the original Fifth .Five Year Plan (1951-55) goals and was running
well .ahead of the very conservative increase planned for 1955. The
volume of investment increased substantially and assured a slight
overfulfillment .of the plan. -Both these developments suggest that
changes in. industrial organization and planning over the past 2 years
were successful. -Production of coal, petroleum, steel, and. electrical
energy is rapidly approaching the levels which Stalin designated in.
his 1946 election speech as the material basis for Communism and
should reach most of these goals in 10 to 13 years instead of the 15
to 20 years which Stalin thought would be required.
A nuMber of immediate problems, however, still persist. Many of
' the top-priority industries will slightly exceed the 5-year targets
but only by straining capacity to the utmost without the slack that
has usually been available for above-plan production at the end of a.
plan Period. Considerable excess purchasing power remains in the hands
of consumers, and the whole wage structure must be overhauled. Agri-
cultural production is still lagging and has necessitated the diversion
of labor from industry to agriculture. The investment plan for the
* The estimates an& conclusions contained in this memorandum repre-
sent the best judgment of ORB as of 1 November 1955.
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1951-55 neriod will be achieved, but because of inefficient construction.,
the cost of the program will be considerably higher than anticipated.
Although there has been considerable iiprovement in construction labor
productivity thus far in 1955, the hig cost of construction remains
one of the most serious chronic prob1exis in the Soviet economy, Cost
reductions in industry were slightly b hind. the plan on the whole. .The
volume of rail transport increased in the first half of 1955 but the
original 1955 goals already had been e_ceeded in 1954. This overful-
fillment resulted from longer-than-pla ned length of haul for fuel,
timber, and other basic materials rath r than from the early completion
of over-all production plans. The ec9omy as a whole reflected not
only the stresses and strains incurred by the "great projects" and by
logistical support of the Korean. War (1949-52) but also the diffi-
culties encountered in .launching and implementing the post-Stalin con-
sumer goods program.
The :?rincipal long-range problem facing the Soviet leadership on
the eve of the Sixth Five Year Plan (1956-60) is a lagging agricultural
production. In addition, the leadership faces serious problems in the
slow rates of growth of labor productivity and of saving to support.
state irriestments. These problems are closely interdependent, and with
the maturation of the Soviet economy, the solution to each problem is
more dependent upon success in the other two than in the 1928-50 period.
Expansion of agricultural production ie essential to provide more
quality foodstuffs for industrial worker -incentives, to continue to
provide an important contribution to investment, and eventually to resume
the transfer of labor from the agricul ural to the industrial sector.
,Current policies designed to increase gricultural production combine
both the carrot and the stick -- on th one hand, increased incentive
and concessions to the peasantry and m re local authority in production
planning and, on the other, increased authority of the machine tractor
stations, increased obligations for deliveries to the state, and the
assignment of 30,000 Party technicians of urban origin as collective
farm chairmen. Agricultural production!, however, is not particularly
responsive in the short run to changes in investment priorities and
administrative reorganization. Here tIr Soviet .leaders are faced with
the traditional peasant resentment against the regimsa the depletion
of human resources in the villages bequeathed to them by Stalin, their
own ideology which forbids any retreat from the collective farm system,
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and the innate characteristics of agricultural production, where the
human and physical environment is much less subject to control and
manipulation than in the factories. Although some improvement in ag-
ricultural production can be anticipated during the period 1956-60 it
very probably will be less than planned and less than required to
achieve the other objectives of the leaders.
For the first time since 1928 the Soviet leadership must rely pri-
marily on increased productivity per worker in order to obtain most
of the planned increases in industrial production during the period
1956-60; because an expansion of the labor force will provide only
about 25 percent of the increase in production instead of about 50
percent as in the past. The leadership realizes that if lagging out-
put per worker endangers the production goals during the next 3 to
5 years, agriculture no longer can provide a pool of surplus labor
from which the industrial labor force can be increased in compensation.
Four important measures are being taken to increase output per worker:
excess purchasing power is being reduced SO that the incentive effects
of consumer goods are not negated by the Soviet variety of inflation,
the supply of quality foodstuffs and, clothing is being increased, the
system of worker output-quotas ("norms") is being revised upward, and
a rapid expansion in the quantity and quality of capital equipment
available to each worker is planned.
In order to finance the flow of capital equipment required to
continue the rapid expansion of industrial production, it is necessary
to reverse the recent trend of savings mobilized by the state. The
growth of state savings will be facilitated if the reduction in the
growth of purchasing power and the reform of the wage system insure
that in the future (unlike the period 1952-54) the state receives more
from the workers each year in the form of increased productivity than
it in turn pays to the worker S in the form of increased wages. Mil-
itary requirements will continue to be a serious drain on resources
which otherwise would be available for investment, and the current
Soviet peace campaign probably is in part a direct consequence of
the leadership's desire to keep the increase in defense expenditures
to a minimum during the period 1956-60. Higher profits made possible
by cost reductions throughout the industrial sector will continue to
be an important source of savings; but it is unlikely that the pro,-
portion of increased profits derived from this source could be much
higher in the future than in the past.
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Whereas maintaining high rates of inv stment may be more difficult
in the future, the Soviet leadership anti ipates that recent develop-
ments in technology will provide some ipijovement in output per unit
of new investment during the next 5 years las compared with the period
1950-55, when capital expenditures required for an additional unit of
output were increasing in a number Of key industries. This expectation
probably wi:.1 prove overoptimistic, however, inasmuch as declining
output per unit of new investment appears to be normal as the ratio of
capital to :.abor increases. At the same lime, current ideologidal
objectives, which neglect the efficiency qf unskilled labor relative
tpr madhiner:r and highly skilled labor in some production processes, are
i3k certain extent incompatible with the need to get more procluctlori.
from a given amount of investment.
If the performance of the Soviet econrny is now assessed from the
point of view of the Soviet masses, it cartbe concluded that the mater-
ial well-beng of the Soviet citizen continued to improve during 1955
but that expectations for the future were subject to more conflicting
currents than at the end of 1954. ',This will undoubtedly be the best
year for the Soviet consumer since the onset Of forced industrializa-
tion and collectivization in 1928; but th more immediate personal
needs of the ordinary citizen were far fran satisfied. Although pro-
duction of manufactured consumer goods co tinued to increase in the
first half of 1955, only a very small num er of Soviet households
could afford to buy many of the luxury consumer goods; such as auto-
mobiles or television sets. .Increased production of textiles, pots.
and pans, footwear, and furniture benefited the broad masses of the
population; but these items remained relatively expensive and low in
quality. Many consumers had the desire and the mines to purchase
larger quantities of less expensive goods Which are in short supply,
particularly quality foodstuffs (meat and dairy products and vege-
tables) and housing. But queues were sti41 chronic and long. Con-
sequently, ea-though the increase in the strate loan and the failure to
reduce retail prices* have prevented the *mai increase in the size
and purchasing power of the take-home pay bf the Soviet citizen, his
morale probably has been little affected; because the consumers still
have more rubles available than can be spent on the things most desired.
* Price rebactions on a few luxury items rand aluminum cookware were
announced in July, but this reduction was in no way comparable to the
annual price reductions of the previous 7 rears.
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Any hopes that the Soviet economy would shift its orientation from
investment to consumption in the immediate future has been exploded
during the past 6 months. However, the new agricultural program, the
continued substantial increase in consumer goods products, and the
emphasis on better housing leave no doubt in the mind of the Soviet
citizen that the present leadership accords consumption much higher
priority than did Stalin. Social discipline was tightened a little
in the beginning of 1955, but this was directed at improving effi-
ciency in production and lacked the punitive characteristics of the
Stalin era. On the whole, the bonds remain loosened, and there are
some signs of further relaxation in some areas.
? The expectations of the Soviet citizen for the next 5 .years are
also favorably affected by the stress on technological progress and on
the elimination of the distinction between mental and physical labor,
which means that more and more Soviet citizens will be engineers; tech-
niciansvand highly Skilled workers, thereby escaping the illiteracy
and manual labor of the past.. Last but not least, the slight relaxa-
tion of international tensions during 1955 not only should reduce the
popular fear of war but also should raise the ordinary citizen's hopes
of a slightly more favorable distribution of the social product in the
future.
On the whole, the Soviet leadership currently is exhibiting a more
realistic, rational, and flexible approach to the economic problems
confronting them and somewhat greater concern for the economic lot of
the ordinary citizen than was characteristic of Stalin.
I. Introduction.
? In February 1955; Malenkov "requested' his release from the post of
Premier on the grounds of errorand incompetence in the administration
of the economy of the USSR. With the appointment of Bulganin as
Premier the vast propaganda machine did an about-face -- a jDovc --
reemphasizing the preeminence of heavy industry and the subordination
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of light industry in the Soviet pattern o growth. A number of econt-,
?mists who had assumed or argued that the USSR had made a basic,
permanent change in economic policy and that consumption rather than
investment was to become the end of econo*c activity in the USSR
were severe4 criticized. The plan fulfiZIment results for the first
half of 195!;* provide an opportunity to evaluate the impact of these
events on the Soviet economy and to de-terrine whether the pattern of
resource alLocations has changed.
Along w:_th the release of the plan fulfillment data, Bulganin de-
livered .a detailed report on industry to a plenum of theCentral Com-
mittee of the Communist Party of the USSR. The substance of Bulganin's
report had been largely foreshadowed in a numbEr Of articles Which
appeared in the theoretical journals during the second cLuarter of 1955.
.Taken together, this body of information rrovides the basis for a
fairly.compLete evaluation of the Soviet economy immediately preceding
the Sixth F:.ve Year Plan (1956.-60). The rincipal objectives of this
memorandum, therefore, are to relate actu 1 achievements to planned
goals, to indicate the principal problems facing Soviet planners for
the next 5-year period, and to outline some of the basic: policies
which will Letermlne the growth pattern of the economy in the Sixth
Five Year Plan.
II. Industry.
A. .Trends in-Production.
During the first half of 1955, in atrial production in the
USSR not only exceeded the original (1952) 5-year goals but also in-
creased at a rate which will exceed the planned level of production
announced in 1955, when the goals were reVised upward in view of the
imminent achievement of the original objectives. -Total industrial pro-
duction as well as the production of heavy and light industry grew
considerably faster than the rates planned for 1955, which were much
lower than at any other time in the post-World War II period (see
Table 1**). If the actual rates Of growth of the first half Of1955are
projected-to the end of the yearj.the resu4t in terms of the cumulative
growth of industrial production is as shoi in Table 2.40E*
* Unless otherwise stated, the base period for all percentage
changes reported in this memorandum for the first half of 1955 is the
first half of 1954.
** Table 1 follows on p. 7.
-*** 'Table 2 follows on p. 9.
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Table 1
Increases in Gross Industrial Production in the USSR
1951-55 a/
Percent
Increase over Previous Year
1955
First Half
1951
1952
1953
1954
(Plan)
of 1955
Total production
17
11
12
13
9
12
Producer goods
17
(12) 12/
(12)
(13)
11
(13) 2/
Consumer goods
16
11
13
(12)
(6)
(10) 2/
a. Data contained herein are from yearly plan fulfillment reports
and from Bulganin's speech to the 1955 Supreme Soviet. 1/ (For ser-
ially numbered source references, seethe Appendix.) Although the
weighting system employed is unknown, ,Soviet statistics on gross in-
dustrial production provide a rough measure of the direction and mag-
nitude of change. Moreover, these statistics are useful because they
represent one of the principal yardsticks by which economic growth is
planned and measured in the USSR. For a detailed comment on some of
the problems of rounding and internal consistency encountered in
these statistics; see source 2/.
b. Parentheses denote interpolation.
c. Only the rate of growth of total production -- 12 percent -, was
reported in the plan fulfillment report. The interpolated rates of
growth for producer and consumer goods are consistent with the 7 to
3 ratio Of weights given in Soviet sources. A number of pairs of
rates are, of course, consistent with a 12-percent increase in total
production. Rates of growth of 13 percent for producer- goods and
10 percent for consumer goods are estimated for the following reasons:
(1) the increase in consumer goods production in 1955 would be at
least as large as the increase in trade turnover, :which was reported
as 8 percent, because inventories and stockpiles were depleted in
previous years and probably are being replenished in 1955, and (2)
the data on the increase in the sales of various consumer goods
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Table 1
Inc:?eases in Gross Industrial Pro"
1951-55 a/
(Continued)
uction in the -USSR
indicate that the rate of increase in conSumer goods available to the
population declined about 15 percent in the first 6 months of 1955,
as compared with the rate of increase in 1954, which is consistent
with a decl:Lne in the rate of growth of consumer goods production
from 12 percent in 1954 to 10 percent during the first 6 months of
1955.
These achievements suggest that t e changes in organization and
planning and the emphasis upon the introdi4ction of new technology al-
ready have had some effect, unless Bulganin purposely underestimated
the capabilty of the economy in February It was believed at that
time that the low rates of growth planned for 1955 represented the de-
sire of the regime to ease temporarily th strain on the economy in
order to provide a more firm and flexible base for the Sixth Five Year
Plan. In Nt.ew of subsequent developments, however, this hypothes&s
appears unlkely. There remaineeveral alternative explanations for
the low rates of growth -planned for 1955: .(1) Bulganin stated a con-
servative estimate pending the implements ion of changes in organiza-
tion and planning, (2) Bulganin purposely underestimated the capa-
bilities of the economy as part of the prcipaganda campaign to dampen
popular expectations of a rapid improvemeAt in the standard of living,
or (3) Bulganin and his planners errei seriously in their estimate of
immediate production prospects.
Despite current successes, the Fifth Five Year Plan (1951-55)
will not exceed the original estimates as much as did the results of
the Fourth Five Year Plan (1946-50). The iFifth Five Year Plan, however,
was somewha-; more ambitious than the Fourth Five Year Plan, and it did
not have the benefit of quick returns from reconstruction and recon-
version. In the Fourth Five Year Plan, however, the planned growth of
industrial production (1950 over 1940),waEi exceeded substantially
the actual reported increase of 73 percent in contrast to the 48-Per-
cent increase planned. On the other hand, production of consumer
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73 73
73 Table 2 73
3 3
< <
M Cumulative Indexes of Industrial Production in the USSR a/ M
CL _ CL
1952-55
nn nn
o o
-1 1950 = 100 -1
Pp Pp
CD m
ET First Half of 1955 ET
m Original 1952 Goals Revised 1955 Projected to the End M
O 0
M (Reached 1 May 1955) Goals of the Year M
-a -a
CD CD
CD Total industrial production 174 180 185 a,
CD CD
8 8
CD Producer goods 180 184 187 CD
is-3 Consumer goods 160 172 177 is-3
_& _&
.. ..
C) a. Original goals are from the Fifth Five Year Plan directives; revised 1955 goals are as 0
> stated by Bulganin in July 1955. 3/ The index of 172 for consumer goods represents an up- >
33 ward revision from the index of 171 given by Bulganin in his speech to the Supreme Soviet 33
0 in February. 4/ Bulganin also stated in July that the original goal for consumer goods was 0
17, 165 instead of the index of 160 previously used by Soviet leaders. The projected end-of- 1:I
--.1 --1
CD the-year indexes are derived from Table 12 p. 72 above. to
?I ?I
0 0
0 0
CD CD
04 04
cri cri
> >
0 0
0 0
0 0
04 04
0 0
0 0
IV IV
CDCD
0 0
0 0
0 0
-a -a
CD CD
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goods fell far short of the Fourth Five Y9ar Plan goa1s1:whereas in
the current plan the original goals will be substantially exceeded.
.The cumulative (1951-55) goal for consumer goods under the
Malenkov program was never published, but it is estimated that the
1955 index would have been between 180 an4 185 (for comparison, see
Table 2*). The Malenkov program, however, was dependent upon un-
realistic goals for agricultural production. .Foodstuffs alone, for
example, account for nearly 55 percent of state retail trade. By the
end of 1954 it was apparent to the USSR tl4at it could not meet the
planned goals and that temporary expedien s were nearly exhausted. In
the meantime, consumer purchasing power, *Which already had exceeded the
available supply of goods at the beginnin of the "new coursehad-ex-
panded too rapidly as a result of the reduction in the state loan?,the
retail price reductions, and the concessicins to the peasantry in taxes
and procurenent prices. Moreover, the propaganda campaign associated
with the Malenkov program raised popular expectations to unjustified
levels. Several Soviet writers in the official 'journals even went to
far as to sEq that the period of forced industrialization was over-and
that, in the future, individual consumptiOn rather than heavy indus-
trial growth would be the end object of economic activity in the
USSR. There is no evidence that Malenkov concurred (although the
planned rates of growth for 195).. and 1955 may have been a little
higher for light industry than for heavy industry in order to rectify
the past "disproportion"), but these ideas apprently were widespread.
The USSR presently is undertaaing h long-range program to in-
crease production of quality foodstuffs ard to provide more living
space. At the same time an end has been put to speculation that there
has been a revolutionary change in economic policy. The policy in-
novations of 1955 reflect not a reversion to Stalin's policy but an
adjustment in the light of 2 years' experi.1enc. Both the Malenkov
program and the current programs are basedj upon the implicit assump-
tion that consumption) which is in effect treated as a cost of pro-
duction to the state, must be increased across the board in order to
provide -incentives for increased labor productivity.
* ic 9. above.
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If Bulganings report can be taken as a guide, the pattern of
growth of industrial production in the Sixth Five Year Plan will remain
approximately the same as in the past. Heavy industry will continue
to expand faster than light industry -- that is, the yearly rate of
growth of the former probably will be planned at 2 or 3 percent above
the latter; but consumer goods production will continue to receive
much higher priority than under Stalin. ,Within heavy industry the so-
called 'pleading links" -- coal; petroleum; metallurgy; and electric
power -- will continue to receive high priority. The yearly production
of 60 million tons of petroleum, 500 million tons of coal, 50 million
tons of pig iron, 60 million tons of steel, and 250 billion kilowatt-
hours (kwh), which Stalin in 1946 defined as the point of departure
for Communism and which he expected to require three mr more Five Year
Plans to attain) will be exceeded or closely approximated by 1960. In-
deed, petroleum production will have reached Stalin's goal by the end
of 1955.
B. Heavy Industry.
1. Basic Material and Service Inputs.
In the first half of 1955 the rates of growth in the "lead-
ing links" coal; petroleum; metallurgy, electric power -- generally
were higher than in 1954; and consequently the Five Year Plan goals
for these industries generally will be exceeded by a small margin. This
is a reversal of the trend evident at the end of 19541:when it appeared
that a number of these top-priority industries would barely reach, and
in some cases would even fall short of, the 1955 production goals (see
Table 3*). Throughout the post-World War II period these industries
received 4 proportionately larger share of available resources than in
the prewar period. In 1948-49 there occurred a marked shift in in-
vestment allocations in favor of these industries, and a further shift
was made in the Fifth Five :Year Plan. ,As a result of this emphasis,
production goals of the Fourth Five Year Plan for these industries
were exceeded substantially; and the goals for the Fifth Five Year
Plan (announced in 1952) required further growth at very rapid rates,
despite the already expanded base to which the increases would apply.
For example, the plan called for a 62-percent increase in production
* Table 3 follows on p. 12.
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S-E-C-R-E-T
Table 3
>
73
73
3
<
cr,
a
-n
o
-1
Pp
(t,
ET
a)
cf)
_&
CD
CDCD
CD
8
CD
_&
..
C)
>
Increases
Industrial Material
in Production
Increase over
of Selected Basic Industrial Materials
in the USSR
1951-55
Percent
Previous Year
First Half
of 1955
Planned Increase:
1955 over 1950
Increase
Required
in 1955
1951
1952
1953
1954
Pig iron
Crude steel
Rolled steel
Zinc
Lead
Copper
Coal
Crude petroleum
Electric power
Caustic soda
14
-I -.,R
15
15
25
14
8
12
14
8
14
10
12
24
17
15
7
12
13
11
9
10
10
13
22
N.A.
6
12
13
15
9
8
9
7
13
5
8
12
11
11
12
lo
11
7
14
14
12
19
12
12
76
62
64
150
170
43
85
80
79
14
8
6
45
34
8
17
11
17
Pp
0
T
-..1
CD
?I
CD
CD
CD
04
al
>
CD
CD
CD
04
CD
CD
IV
CD
CD
CD
CD
-a
c
Calcined soda
Mineral fertilizers
Synthetic rubber
Cement
Bricks
Slate
Paper
9-
7
20
19
20
27
12
21
8
9
15
19
26
9
IT
9
13
15
12
22
lo
-10
16
1
19
13
17
lo
9
21
9
22
13
18
4
84
88
82
120
130
160
46
6
28
22
17
27
14
a/
a. ?Overfulfilled in 1954.
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of crude steel and an 85-percent increase in production of crude petro-
leum; which may be Contrasted with the comparable. increases of about
35 percent and 10 percent) respectively, planned.on a much smaller
base for the 1940-50 period-
Despite the high priorities accorded to) and the rapid
rates of growth achieved inl these "leading link" industries through-
out the post-World War II period). the requirements placed upon them
have grown even faster. Thus a Soviet writer recently admitted what
had long been suspected -- namely).that the growth of the engineering
industries had been inhibited by an insufficient supply of ferrous
metals:
As is known; the engineering industries have for a.
number of years developed at a more rapid rate than
the metallurgical industries. -Consequently metals
have been constantly in short supply in the engineering
industries. .The shortage of metals acted as a brake
on the growth of production in the machine building in-
dustries) which; nevertheless) continued to expand
faster than metallurgy. ,The engineering industries
achieved great economies in the use of metal by reduc-
ing input quotas and by improving the structure of
metal consumption. The weight of new and modernized.
machinery has been .continuously reduced without im-
pairing the technological parameters... . The objec-
tive or the future/ is not only to liquidate scarcity?
in the supply of metal to the engineering industries
but also to _create a reserve stock.- of metals in order
to provide supplemental allocations to machine build-
ing enterprises which have overfulfilled. the plan for
the more important end items, and for those items
which are in short supply. ..5_/
The recentlysinitiated program to increase the use of ferroconcrete
structures instead of steel in building is also indicative of the
shortage. .Similarly, the emphasis on hydroelectric construction and
the recent upward revision of coal production plans both suggest that
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energy requirements consistently have been underestimated. Bulganin's
report to the Central Committee indicated that the expansion of
electric power generation was not sufficietly ahead of the expansion
of industry as a whole. g
, The generation of electric pow r increased 12 percent in
the first half of 1955, and the Fifth Five Year Plan will be slightly
exceeded if this tread continues. Because of a serious lag in the
production of steam turbines and generators,'however, such success
apparently will be at the price of using eXisting equipment to the
limit,:with little reserve capacity. It i estimated that the installed
electrical generating capacity by the end of 1955 may be as low as
75 percent above 1950 instead of 100 percept as originally planned.
The rate of increase of electric power generation probably will be
higher in the next 5 years inasmuch aE "electrification" of production'
proceSses is to be one of the key factors n :the growth of labor
productivity.,
In the. Sixth Five Year Plan th :USSR is planning to in-
crease hydroelectric power as a proportion of the total, principally
by the construCtion of a number of extreme y large installations in
Siberia. At the same time, a large-scale xpansion of industry in
Siberia is being planned for the next 5 or possibly 10 years.
Output of petroleum has gone up sharply since the end
of 1954, increasing-I9 percent compared with yearly increases of 12
percent for the 1951-54 period. At the end of 1954 it appeared that
the original Fifth Five Year Plan goal for petroleum had been revised
downward, but the 19-percent increase in the first half of 19551 if
maintained, will bring about the achievement of the original Five
Year Plan goals. It is possible that a baSic shift in policy regarding
the proportion of energy to be derived froth petroleum compared with
coal and other fuels occurred in the early part of 1955. Historically,
Soviet planners have substituted coal for petroleum on a large scale
despite the fact that production costs of petroleum were far less,(on
an energy evivalent basis) than for coal +- so much less, in fact,
that petroleam products included a turnover tax even to heavy indus-
trial consumars. The rationale for disco ting the lower production
cost of petroleum is believed to have incl ded several factors:
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(a) the high transportation costs incurred owing to the historical
concentration of petroleum production in the Baku area, (b) the
vulnerability of the Baku region to attack, and (c) the desire to
keep the dependence of the economy on petroleum products at a minimum
and thereby provide greater flexibility in an emergency. Recent
changes in the location and availability of petroleum deposits may
have reduced the importance of these factors and resulted in a de-
cision to take advantage of the low cost of petroleum as compared with
coal by increasing petroleum's share (currently about 20 percent) in
the fuel balance. .The Trans-Volga and southern Urals fields now pro-
vide almost 60 percent of the total production of petroleum and
apparently are very low-cost producers. -Consequently transportation
costs of petroleum now compare much more favorably with those of coal,
and the vulnerability of the industry is somewhat reduced. Moreover,
the post-Stalin regime shows a greater propensity to take real cost
considerations into account when making decisions. .The locational
shift in production of petroleum also may be a causal factor in the
renewed emphasis on locating new industries in Asiatic USSR and should
_add to the general efficiency of the economy by. reducing transport
costs.
.The rates of increase in output of ferrous metals were
somewhat higher in the first half of 1955 than in 1954. In the latter
year it appeared.that production of steel would barely reach the
1955 target and, that there would be a significant shortfall in pig
iron (see Table 3*). Inasmuch as the short supply of ferrous metals
has slowed the growth of the engineering Industries in recent years
despite the fact that production goals for finished steel have been met,
a considerable expansion of the former industry can be anticipated in
the next 5 years. According to Soviet writers, 7/ future increases in
production of iron and steel will require a relatively greater invest-
ment in new plants and facilities than in the current Five Year Plan,
when increased efficiency in the use of existing plants was to provide
25 to 30 percent of the increase in output.
A projection of trends in chemical production during the
first half of 1955 leads to the conclusion that production of many.
chemicals will fall short of the cumulative 1951-55 goals. Production
* P. 12, above.
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of caustic soda and synthetic rubber almost certainly will be less
than planned. Production of mineral ferti iZers rose sharply (21
percent) during the first half of 1955, an if the 1955 goal of a
24.-percent increase is achieved, .?./ the cumulative growth for the
5-year period will be more than 80 percent (1955 over 1950). Al-
though this will be less than the original goal of 88 percent (1955
over 1950), .the result is still impressive and important because of
heavy requirements for more mineral fertiltzers in agriculture.
The chemical industries are sl ted for rapid expansion in
the Sixth Five Year Plan. The broader app.ication of chemical pro-
cesses in the economy, the so-called 'chemica1ization of production)"
is to be one of the key measures in increaSing labor productivity. The
chemical indastries themselves are readily adaptable to automation.
Moreover, the high priority accorded to th agricultural sector is
reflected in plans to double production of chemical fertilizers in the
next 5 years.
Judging from the results of the first 6 months, the pro-
duction of aluminum at the end of 1955 Slightly exceed the am-
bitious planned increase of 160 percent for the 1951-55 period.
Apparently this is not enough., however, beause Bulganin singled out
the aluminum industry for continued rapid expansion, which probably
reflects not only increased requirements for military end items but
also the regairements for consumer gocds. Production of other non-
ferrous metals, however, is considerably behind the original 5-year
plan. Production of copper is especially Lagging, and this metal
is known to oe in short supply. Althcugh -n 1954 output of lead was
double that Df 1950 and output of zinc was more than 70 percent above
the 1950 level, the original 1951-55 plan or these m?isI been
abandoned. NTevertheless, it can be inferr d from available Soviet
data that th a output of zinc during the fist half of 1955 was running
well behind even the new, downwardly revis d plan, increasing only
7 percent over the first half of 1954 comp red with a planned increase
for the year of 16.5 percent. On the othe hand, output of lead ex-
ceeded the pLanned rate of increase for th year. Pressure for rapid
expansion of these industries can be antic pated in the future. Goals
for 1960 may be double the 1955 level of oUtput for most nonferrous
metals.
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2. -Engineering :Industries.
During the first half of 1955 the engineering industries
continued to expand rapidly,. and the pattern of growth generally fore-
shadowed the basic trends planned for the Sixth Five Year Plan, In
some instances, however, the rates of growth of machinery production
.are far less than the planned rates of growth (see Table 4*) and do not
appear consistent _with the growth of the industries which use this
machinery. The whole pattern of development of the .engineering
industries is considerably different in the Fifth Five Year Plan from
that in the Fourth Five Year Plan. From 1946 to 1950, almost everr.
major engineering industry had a 1950 goal of from 2 to 4 times the 1940
rate, and much of the increase was to come from new plants in the
relatively less industrialized areas of the country. .In the -Fifth Five
Year Plan? _many engineering industries had relatively small projected
rates of increase -- about 20 percent for the automobile and tractor
industry, for. example. On the other hand, those engineering indus-
tries which provided the .capital equipment for .the basic metal and
energy Industries and for the "great projects" -- the oil and electri-
cal equipment industries, for example -- were scheduled for great
_expansion 4 In practice, some industries :the locomotive industry,
for example -- were so disrupted, by shifts in the product mix during
1949-52 that production declined substantially.
The cumulative increase in production of hydroturbines
during the .first half of 1955 will exceed 700 percent for the 1951-55
period. -Production of steam turbines, on the other hand, has remained
at the same level as the first half of 1954, -although a 33-percent -
increase in 1955 is required to meet the Five Year Plan goal. Produc-
tion of equipment for the petroleum industry. will be .far behind the
Five Year Plan, goal for a 230-percent increase because by the end of
1954 production of petroleum equipment was only 50 percept above the
1950 level.. .Similarly, production of metallurgical .equipment probably
is barely above the 1950 level despite the planned- increase of 85
percent (1955 over 1950). -How the USSR is achieving its planned pro.-
duction- goals for ferrous metallurgical products and petroleum products
without the planned inputs of capital equipment is not known. In any
event, production of equipment for these industries. is scheduled to
be expanded substantially in the next 5 years. .In ferrous metallurgy,
,in particular ,-a smaller proportion of the increment to production**
* -Table follows on p. 18.
.** Continued on p. 20.
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Table 4
Increases in Production of Selected Industrial End Items
in the USSR >
>
"0 1951-55 "0
"0 -0
a a
< Percent <
0
? cr?
a
a
ILierette over Previoub Year Increase m
-n
O First Half Planned Increase Required 0
-1
-1 End Item 1951 1952 1953 1954 of 1955 1955 over 1950 in 1955
73
73
CD
CD
ET Steam turbines 10 8 40 44 130 33 (7
A) Large hydroturbines 145 24 35 82 10 680
0
O Electric locomotives 11 34 7 . 22 N.A. (1)
_.% Steam locomotives N.A. N-A, 163 13 -16 N.A.
CD
CD Freight cars LA. N.A. 3 N.A. 38 N.A. co
CD
CD Trucks N.A. 11 .11 12 15 CD
8 Passenger cars N.A. 7 30 23 13 49 8
CD
CD
Antifriction bearings 30 17 15 13 15 N.A.
_.% Petroleum equipment LA. 44 17 N.A. N.A. b/ 250 _.%
.. Metallurgical cqui--cnt w A 1,1
14.rie _LC. i Q
...., 5 ?
_t_ 0,?
(.0 0?
OU L./ ..
0
0 Metal-cutting machine
4 > '
. tools 3 d/ 14 8 16 LA.
73 Large; heavy, and unique 73
0
0
"0 -_tools .11 26 2/ N.A. "0
"A Chemical equipment 38 28 24 14 5 230 32
CD
CD
?I Loons N.A. 39 2 -69 2 LA. ?I
a
. a Spinning machines N.A. 18 LA. 9 11 N.A. a
a
CD Tractors N.A. . 7 , .13 22 V .27 68 f/ 14 to
ca
GI
cn Grain combines 15 W,A, 2 LA; :22 N.A. cn
> Sugar-beet combines N.A. 19 50 140 75 a N.A.
a >
a
a
a
a
GI * lbotnotes for Table 4:follow on p.19. GI
a
a
a
a
r..) -18-
0
a
a SEC-R-E7T a
a
a
6
6
> >
73 73
7373
Table 4
3 3
< <
M Increases in Production.of Selected Industrial End Items M
CL in the USSR a
ln 3,951-55 m0
-1 (Con t itued ) - 0
1
Pp Pp
m m
ET ET
a. Overfulfilled in PA 1954, when the cumulative index for the 1951-54 period reached 746. PA
M b. Production of petroleum equipment is planned to be only 50 percent above the 1950 level at M
-& the end of 1955. 2/ -&
CD c... It is estimated that production of metallurgical equipment dropped sharply in 1951 and that CD
CD CD
CD the index at the end of 1954 (1950 = 100) was approximately 103. VCD
8 d. Ministry of MAChine Tool Industry only. 8
CD CD
e. Production of this class of machine tools is planned to be 180 percent over the 1950 level is.3
"by the end of 1955. 10/ "
.. ..
f. The original goal of a 19-percent increase is believed to be in terns of horsepower, which
0 0
is estimated to be equivalent to about a 40-percent increase in terms of physical units. ..Re-
>>
33 vised.goals under the "new course" provided for about a 68-percent increase in physical units, ,
:which probably will be achieved. 11/ Pp
0 ? 0
1:1 1:1
CO CO
?I ?I
c) c)
c) c)
CO CO
G4 G4
C)1 al
> >
c) c)
c) c)
c) c)
G4 G4
C)C)
C) C)
IN3 IN3
COCO
C) C)
C) C)
C) C)
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will be deri,red from increased efficiency in the use of existing .ca
pacity, and a correspondingly larger proportion from new plants and
facilities, than has been the case during the past 5 years. 12/
/L 16-percent increase in production of metal-cutting ma-
chine tools was reported for the first half of 1955, and, snore important
for the future, .a 67-percent increase in p oduction of forging and
pressing equ4ment. Soviet reporting of metalworking machinery in the
Fifth Five Year Plan has not been consiste t either in terms of cate-
gories or in terms of subordination of the roducing units. It is
probably a safe assumption, however, that the 1951-55 goals will be
reached.
,The metalworking equipment industry is scheduled .for sub-
stantial expansion duringthe -next 5 Years, particularly in the form
of more complex, ,automatic machinery, which is to be one of the key
factors in increasing labor productivity. Jn1ike the emphasis in the
first four Five Year Flans, the main emphasis in machine-tool produc-
tion in the 1951-55 period has-been on heavier) more complex tools
rather than .on rapid expansion of unit outpUt. At the same time, how-
ever, as a heritage of the past, an excessively large proportion of
Soviet production has consisted of relative y few models .Which are mass
produced at low cost. ,These mass productio models are 3general-purpose
tools and are often technologically obsoles ent. Moreover, production
of forging and pressing equipment (which is usually far more efficient
in producing small metal items that Are req ired in large numbers) has
enjoyed lower priority in the past than pro uction of metal-cutting
tools. These two factors probably are larg ly responsible for the
fact that the USSR requires a machine tool nventory approximately
three-fourths that of the US in order to pr cess only about one-third
as much metal.
In the Sixth Five Year Plan thei dominant trends in the
metalworking equipment industries will be ag follows: (a) complex,
specia1ized7tools'(with particular emiihabib on groups linked-together
to perform a production task automatically) will account for a much
larger proportion of production, and (b) production of forging and
pressing equipment will continue to expand rapidly. In other words,
these industries are to provide the machinery for the automation and
mechanization of production processes whichi the Soviet leaders believe
will increase labor productivity more rapidLy than in the past few years.
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Production of row-crop-type tractors continued to increase
rapidly in 1955 and should total at least 63,000 to 65,000 units for
the year compared to approximately 70,000 units planned. The probable
slight shortfall, however, will be in the most important row-crop
model, the "Belorus." Production of heavy, general-purpose tractors
(used primarily for small-grain cultivation) has been stable for
several years and should be ample to support both the agricultural and
industrial sectors during the next 5 years. -Further increases in
production of row-crop-type tractors can be anticipated.
One of the most marked trends in the first half of 1955
was the sharp increase (see Table 4*) in the production of most types
of railroad equipment, an industry which has been in the doldrums
during most .of the Fifth -Five Year Plan. Production of steam locomo-
tives, which dropped to less than one-third the 1949 level in 1952
when many plants were switched over to producing Capital equipment for
?the leading linksand the great projects, probably regained only. about
75 percent of the 1949 level in 1954 and then dropped about 16 perdent
in the first half of 1955. The USSR has, however, a substantial re-
serve inventory of older steam locomotives and is currently converting
-to the production of new, larger, and more efficient models. -Unit
production of steam locomotives will continue to decline in the future
as the USSR begins to implement the extensive dieselitation and elec-
trification program outlined by Kaganovich in M1d-1954. .The internal
evidence in Kaganovich's speech indicates that a comparable program
was proposed in one of the original versions of the Fifth Five Year
Plan, but it is believed that the program was dropped because of the
magnitude of requirements for the great projects, the accelerated ex-
pansion of the leading links, and possibly the requirements for
logistical support of the Korean War, .If the large increases in
production of diesel and electric locomotives reported for the first
half of 1955 are indicative of the future, the USSR will have made
substantial progress toward dieselization and, electrification of
freight hauling on all main lines by 1960. Production of railroad
cars,,' which probably was below the 1950 level in 1954, also is in-
creasing rapidly.
In general, the =results of the first half of 1955 indicate
that the major commodity production goals :in the producer goods sector
will be fulfilled, Most of the items subject to specific annual.
* P. 13777&576-.
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reporting will barely reach the planned goals, which is in sharp con-
trast to the large overfulfillments of the Fourth Five Year Plan.
-Even with a slight shortfall in the present plan, -however, the increase
in production is impressive because of the larger base (1950 for the
Fifth Five Year Plan, 1940 for the Fourth Five Year Plan) and the vir-
tual exhaustion .of unusual sources of graw h available during the
Fourth :Five Year Plan, such as reconversior and reconstruction, looted
capital equipment, and the retention of skilled prisoners of war.
.The pattern of growth of the e gineering industries in the
Sixth Five Yoar Plan apparently will be mo ie similar to the pattern in
the Fourth F:Lve Year Plan than to that in he Fifth Five Year Plan.
.Expansion will be general rather than concentrated in only those indus-
tries which oontribute directly to the leading links. -The-1951.-55' -
period was largely devoted to completing and expanding plants started
or reconstructed in the 1946-50 period, and geographic dispersion al-
most ceased. It is evident from the data presently available that
much new conotruction of engineering industry plants will be initiated
in the next years and that a significant part of this new construc-
tion will.be in Central Asia and the Far Fast. Concomitantly with
this new conotruction? there evidently will be anextensive program
to reequip the technologically more -backward and high-cost enterprises.
? Previously the planners had concentrated on getting more production,
largely igna7ing the fact that some plants had production costs which
were 2 or 3 ..;imes as high as other plants producing the same product,
Similarly, .there will be much greater emphasis on specialization .-?
that is, on ;educing the range of end item produced by an enterprise.
.In the past ;he tendency has been to distribute responsibility for
producing a new product among the existing plants rather than to build
a new, specialized plant to produce the new product, .Thus the pattern
of growth of the engineering industries in the Sikth Five Year Plan,
while in many cases more similar to the 1946-504seriod than to the
1951-55 period, will aim at a more rational growth in the interest of
the greater over-all efficiency of the economy.
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C. Light Industry.
In assessing the growth in production of consumer goods in
the USSR, it is necessary to distinguish between those items which
are processed agricultural raw materials and those goods which are
produced from raw materials of industrial origin. ,This distinction
roughly corresponds to the standard categorization of nondurables and
durables. The USSR, by shifting distribution priorities and by in-
creasing investment allocations, has at various times in the past sub-
stantially increased the output of industrial consumer goods in a
relatively short time. The situation is quite different, howeverl.if
an increase in the output of agricultural raw materials is a prerequisite.
Historically (from 1928 to the present), investment in Soviet
agriculture has had an almost negligible effect upon agricultural produc-
tion. State investment in agriculture (particularly machinery) has
facilitated the large-scale migration of labor to the cities and has
more than compensated for the disinvestment of collectivization (par-
ticularly in the form of animal draft power), but the normal effects of
greater capital intensity upon production have been negated by peasant
resentment resulting from the low level of peasant income and the
political and social pressures applied to the peasantry by Stalin. In
the long run it is increased peasant income, relaxation of political
pressures, more realistic planning, more fertilizers, and better agro-
technology which offer the greatest potential for increasing productivlty
in agriculture. In addition, agricultural production depends upon such
factors as adequate rainfall and the time required to build up live-
stock herds, which makes it very difficult to secure short-run incre-
ments to output merely by shifts in distribution priorities and in
investment allocations.
Output of consumer goods as a whole continued to increase sub-
stantially in the first half of 1955, but the estimated rate of growth
declined 2 to 3 percent below 1954., .In general, those items which were
lagging behind, plan in 1954 have continued to fall short thus far in
1955. .Increases in the production of sewing machines, radios, and
television receivers were substantial but still well behind plan. Fr
duction of cameras, watches and clocks, and household refrigerators
is keeping abreast of the plan. Production of passenger automobiles
increased 13 percent despite the fact that the 1955 plan was fulfilled
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In 1954. On the other hand, the rates of growth in production of bi-
cycles and furniture, which promised to re ch "new course" goals if
the 1954 rates were maintained, declined substantially in the first
half of 1955, Production of furniture may have been affected by the
continued fa:lure of the timber industry tc) meet the production plan.
Production of cotton textiles :probeb1y will meet the plan, but
production or wool and linen fabrics and.lather goods probably will mot.
In general, raw materials are in short sup ly in these industries, with
the exception of raw cotton.. Production ir the linen and. silk .indus-
tries actual:3r declined slightly in the first half of 1955. Production
of leather footwear has definitely been affected by leather shortages,
whereas production of rubber footwear shows a satisfactory increase.
The most serious production failures continue to be in quality food-
stuffs. .The only favorable development in this area was the reported
increase of :6 percent in the production of milk products. Although
still far behind plan these were the highest rates of growth reported
for several years.
In the future the bulk of the increase in consumer goods produc-
tion will continue to depend upon increased agricultural production,
particularly of quality foodstuffs which wi 1 simultaneously provide
incentives to the bulk of the population and bsorb the normal increases
in mass purchasing power. .The other essential to any substantial im-
provement in the standard of living of the
more and better housing. .In addition, pro
have to increase despite the fact that dura
of the populetion. Provision of inceir:ives
of engineersj highly paid techniciant, and
much higher level of output of television s
quality furniture, and even of passenger au
III. -Capital investment.
The reported 11-percent increase in the
,(measured in 1950 prices) during the first
large in viey of the slight reduction fun pl
for capital investment (see Table 5*). A c
rise for the entire year insure an ove
percent in the cumulative 1951-55 plan whi
* Table 5 fcllows on p. 25.
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verage Soviet citizen is
ction of durables will
les are luxuries to the mass
for the ever growing class
nagers will require a
ts, home refrigerators,
omobiles.
volume of capital investment
alf of 1955 is surprisingly
nned .budgeted expenditures
ntinuation of the 11-0percent
fulfillment of 3:to 6
h specified an increase of
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Table 5
Volume and. Financing of Capital Investment
in the USSR 2/
1951-55
1951
1952
1953
1954
1955
Volume (actual)
Increase over preceding
year (percent)
112
111
104
115
111 12/
Financing (planned)
(Billion 1 July 1950 rubles)
132.0
143.1
156.1
169.0
167.5
As percent of preceding year
97
108
109
108
99
a. Volume of investment refers to the value of essentially completed
investment (according to a complex definition of "completion"). ,It is
distinct from the financing of investment, which measures current ex-
penditures for investment purposes.
.b. First.6 months of 1955 only.
90 percent Over the 1946-50 period. It is not known precisely how such
a rate of increase in volume was achieved while planned expenditures
remained approximately the same, but a number of possibilities exist.
.First, actual expenditure for investment in 1954 definitely may have
been less than planned, so that planned. expenditures in 1955 actually
represent an increase. Second, installation of equipment paid for in
previous years but not actually installed. and. the completion of a large
number of projects (both of which goals have received much attention in
the Soviet press) would make possible an increase in volume without a
corresponding increase in expenditures. Finally, inasmuch .as a large
number of projects are being pushed to completion this year, the 1955
expenditures for investment may not have included an increase in working
capital for construction.
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Aside from general statements about th trends, little information
on the distribution of investment was rele sed in the 6 months' plan
fulfillment :?eport. Increases were specif cally mentioned for certain
sectors of heavy industry, for transport, dnd for agriculture. Failure
to specify aa increase in investment in 1i4ht industry suggests that
investment may have failed below the level of the first 6 months of
1954. Although the amount of housing construction was stated to have
increased, omission of the customary volum increase indicates that
the rise was less than in other years of t1.e current Five Year Plan.
In general, investment in heavy industry, tate agriculture, and
housing probably will exceed the 5-year go is for volume increases
whereas transport and communications and 1 ght industry probably will
fall slightl:r short of the 1951-55 targets
The gene:7ally satisfactory quantitativ trends are somewhat offset
by the fact 'that the current cost of the pifogram for the 1951-55 period
will be higher than anticipated owing to t e failure to reduce con-
struction costs as planned and to the lagging growth of labor productiv-
ity in constmction. Construction costs were not reduced according to
plan in the :7irst half of 1955 -- a failure characteristic of all the
previous years of the Fifth Five Year Plan Indeed, official reports
indicate tha-; construction costs actually ncreased in 1953. On the
other hand, :_abor productivity in construc ion increased 10 percent in
the first 6 months of this year, which is he highest rate of increase
of the current Five Year Plan (see Table 6). Nevertheless, the Five
Table
Annual Increases in the Productivity
in the USSR
1951-55
of Construction Labor
First Half I crease Required
1951 1952 1953 1954 of 1955 in 1955
9.5 7 I. 8 10
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Percent
1951-55
Goal
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Year Plan for the growth of labor productivity in construction will
not be fulfilled, because of the quite unfavorable rates of growth in
the earlier years. Soviet data indicate that the 1951-55 investment
program probably will exceed. the total cost of the 1946-50 program by
about 90 percent rather than the planned 60 percent. The cost of the
investment program in the Fourth Five Year Plan also was greater than
planned, but the volume goal for that period was exceeded by 22 per-
cent compared with the probable .3-to 6-percent overfUlfilIment for
the 1951-55 period.
.The scale :and pattern of investment in the next 5 years probably
will be quite similar to the trendsin the past few years. Consumer-
oriented activities -- agriculture; housing, and light industry -- will
continue to receive a somewhat larger share of investment funds. Con-
siderable new construction will be combined with renewed emphasis upon
improving existing plants by introducing more technologically advanced
machinery. Thus the investment program in the Sixth Five Year Plam
will be a cross between the dominant trends of the Fourth and Fifth
Five Year Rlans, Two of the primary determinants of the scale of the
1956-60 investment program are, however, relatively unknown quantities ?
namely; the degree to which agricultural production can be increased
so as to provide a larger investment surplus, and the competition of
the military program for investment resources.
IV..Industrial Labor Force and Labor Productivity.
A. Current Trends.
The last 2 or 3 years mark the passing of the era when Soviet
planners could freely milk the agricultural sector of surplus labor
in order to meet and exceed industrial production goals when output per
man in industry did. not increase as planned, .For the next 5 years at
least the dynamics of Soviet economic growth will differ significantly
from the past because the industrial labor force can no longer be ex-
panded at will. Explicit, and remarkably frank, recognition of this
change has recently appeared in the Soviet press, as follows:
.The plan for industrial production was overful-
filled. for the first four years of the Fifth Five
Year Plan despite the fact that the plan- for labor
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:productivity was not achieved or the 1952-54
:period. These results were ac ieved by increas-
Lng the number of workers more than planned.
In the first half of 1954 th-1. number of work-
ers and employees in industryllconstruction and
transport increased 1,200,000 n comparison with
the first half of 1953. .Such tempo of growth
of workers in industry will no be possible in
the Sixth Five Year Plan inasm ch as the agri-
eultural labor force will have to be increased,
and in part by drawing upon th urban population.
Already in the first half of 1 54 the number of
workers in agriculture (machin tractor stations
and state farms) increased by 300,000 over the
first half of 1953.
Thus in the Sixth Five Year
industrial production must corn
:productivity of labor to a gre
in the Fifth Five Year Plan.
workers, are of particular imp
industries, which employ the 11
ing labor productivity. 13/
lan the growth in
from increased
ter degree than
he engineering
rgest number of
rtance in increas-
Bulganin said much the same thing in his J ly 1955 report to the
Central Committee, and most of the importalit policy decisions of the
past 2 years, the agricultural and consume 4 goods programs, the re.-
duction in administrative overhead, and thei changes in the planning
apparatus have been adopted primarily to i crease labor productivity.
The :'ate of growth of labor productivity is important to
the Soviet leadership for several reasons. First, in each of the
postwar Five Year Plans about 75 percent of the increment to pro-
duction was planned to come from increased output per worker, the
other 25 percent to be achieved by expanding the labor force. .It
should be noted in this context that the USSR classifies the contri-
bution of all other factors (land, capital, management) under_the
category of labor productivity. Second, the Soviet leaders believe
that exceeding the level of labor productivity which exists in the
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capitalist world is a prerequisite for the final victory of their
system. Third, it is a principle of Soviet planning that labor pro-
ductivity should increase faster than real wages in order to provide
the necessary saving for investment and future growth. In other words,
what the state gets out of the workers should increase faster than
what the state pays to the workers.
During the past 4 years the growth of labor productivity has
been unsatisfactory on all counts. In order to fulfill production goals
in the face of lagging output per worker, the labor force has been
increased far more rapidly than planned (see Table 7). Exceeding the
planned rate of growth resulted, of course, in a much larger increase
in the wage bill than originally was anticipated, which contributed to
the growth of excess purchasing power. .The growth of excess purchasing
Table 7
.Increases in the Industrial Labor Force
and of Industrial Labor Productivity in the USSR
1951-55
Percent
Increase
over Previous Year
First
Half
of 1955
Planned
Increase
1955 over 1950
Increase
Required
in 1955
1951 1952 1953 1954.
Industrial labor
force a/
5
?4
6
6
4.5
13 lo/
21
Industrial labor
productivity
10
7
6
7
7.0
50
13
a. Derived from Soviet data on increases in industrial output and indus-
trial labor productivity which indicate that the Fifth Five Year Plan goal
was achieved by the end of 1953.
b.? Based on original plan of a 70-percent increase; see Table 1, p. 7,
above. Since the output goal has been revised upward, the labor force goal
also would be increased somewhat (it is known that the productivity goal
was not increased).
c. Overfulfilled. Actual increase will be nearly double the planned
increment.
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power was aggravated further by the reduct ons in retail prices and in
the state loan in 1953-54) while the supplr of consumer goods did not
increase commensurately despite the releas s from inventories and re-
serves, imports, and the emphasis on consuner goods production in 1953-
54. Explicit recognition of this phenomen n recently appeared in the
official press, as follows:
Despite the significant incr
Df consumer goods) certain imb
tween the level of production
and the purchasing power of th
During the past few years the
Df the working population incr
than the production of consume
2ome of workers, peasants) int
excessively increased by the r
tail prices. A larger prcport
lation was able to demand high
During the postwar years) part
and 1954, there was a rapid sh
toward higher quality consumer
:present time the trade network
supply the demand for certain
sumer goods, particularly for
Justrial products and for food
Meanwhile, llbor productivity was not incr
and the imbalance between the consumer pur
availability of consumer goods was an impo.
The net result was that payments of gcods
ers was increasing faster than labor produ
Soviet statistics, labor productivity incr
the 1951-54 :period, whereas real wages inc
ase in the supply
lances exist be-
f consumer goods
population.
urchasing power
ased faster
goods. The in-
lligentsia was
ductions in re-
on of the popu-
r quality goods.
cularly in 1953
ft in mass demand
goods. At the
is unable to
ategories of con-
igh quality in-
tuffs. 112/
asing according to plan,
hasing power and the
tant contributing factor.
nd services to the work-
tivity. According to
ased only 33 percent for
eased 37 percent. From
the point of view of the Soviet leadership) such a relation between
these rates )f growth is highly unfavorable because it tends to con-
strict the szrplus available for investment and hence the rate of
growth of the Soviet economy.
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Labor productivity has been lagging not only in industry as a
whole but also in many of the basic extractive industries, where the
rates of growth have been much less than the average (see Table 8),
Table 8
Indexes of Labor Productivity in Selected Industries
in the USSR
1940 and 1954
1940
1954
.Total industrial labor productivity
200
180
Coal industry
100
120
Timber industry
100
106
Ferrous metallurgy
100
174
Transport
100
131
Indeed, some of the high-priority industries -- coal and timber,* for
example -- have the lowest rates of growth in labor productivity despite
the heavy capital investment in these industries during the postwar
period. '11h.e timber industry, for example, had a fourfold increase in
capital stock between 1940 and 1954, but labor productivity increased
only 6 percent; and the slow rate of growth of labor productivity in
the coal industry persists despite the large investment in modern
machinery and facilities, 12/ This suggests that coercion and control
techniques are essential factors in the growth of labor productivity in
the USSR, since in these two industries, which have been relatively
well provided with incentives and capital equipment in recent years but
in_which labor cannot be continuously controlled and supervised as in a
factory;:the 'relative growth of labor productivity is low,
* The high priority of the timber industry, of course, dates only from
the end of the Fourth Five Year Plan (about 19)49).
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In _addition to morale factors, there are other important insti-
tutional phenomena which are inhibiting the growth of industrial labor
productivity, The whole system of labor "norms," or output quotas for
various types of workers, is completely oult of date. .The last complete
revision was in 1931 and was only partial; despite the tremendous sub-
sequent changes in technology, only haphazard adjustments have been
made since that time. Premiums and bonusea for exceeding the norms
account for nearly one-half the total wage bill. It is probable that
the premiums and bonuses are being paid as much to reduce labor turnover
as to reward the workers for outstanding levels of productivity. The
abuses of the wage system and attendant consequences have recently
been stated quite frankly by Soviet writer, as in the following excerpts:
The system of premiums which is in force in in-
dustry and -transport, because of its deficiencies
often leads to the result that in a number of in-
dustries and enterprises the w rkers who do the
easiest work are the ones who et the premiums. 1?./
The socialist principle of distribution accord-
ing to work plays an important role in the raising
the technico-cultural level of the workers. It
provides a material incentive o each worker not
only to increase his oUtput but also to improve his
quality. .Consequently the correct application of
c
the socialist principle of' distribution according
to work is a key factor not only in the growth of
Labor productivity but also in the technico-cultural
Level of the workers. The serious deficiencies of
the existing wage rate system, and particularly
the output quotas giorms7 in a number of industries,
reduce the influence of this most important prin-
ciple and damage the naticnal economy. E/
As long as tde industrial lator force could. readily be expanded by
transferring labor from agriculture, these deficiencies in the wage
1.
system apparently could be disregarded. e overriding objective was
to get production. But with the passing o' the era of surplus labor
in agriculture the wage system will have tO be reformed.
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Recently Soviet leaders have publicly complained that the growth
of labor productivity has been inhibited by the slow tempo of techno-
logical progress and by the unsatisfactory dissemination and adaptation
of Western technological developments in the Soviet economy. The latter
failure is apparently one of the consequences of the "Zhdanovshchina" --
the campaign against "bourgeois cosmopolitanism," against the "kow-towing
to the West," against the thought that any one else had discovered any-
thing first -- which was launched by Zhdanov in 1947. One of its man-
ifestations was the disappearance of news about foreign technological
advances from the industrial trade journals. To be sure, superpriority
activities such as the atomic energy program undoubtedly were not af-
fected, but for the ordinary Soviet industry, for the rank and file of
engineers and managers, an important source of knowledge and stimulus
was largely eliminated. The gradual reappearance since Stalin's death
of discussions of Western technological advances indicates that the
desire to speed up technological progress which in turn will tend to
increase labor productivity has overcome these ideological inhibitions.
The growth of labor productivity is slowed not only by the
lagging of technological advance but also by the wide variations in
the technology; scale, andmanageriaL efficiency of plants producing
the same product. Historically; the preoceupation with increasing
production as fast as possible has resulted not only in the construc-
tion of modern and efficient plants but also in the continued operation
Of backward and. high-cost producers. _Few if any Soviet?plants have "
been known to go out of production because their costs- were 2 or 3
times as high as the average, An excellent example of this phenomenon
is provided by the indexes of labor productivity in .the largest .ferrous
metallurgical plants in .the USSR (see Table 9*). .Such variations in
labor productivity are usually accompanied by comparable variations in
production costs, which in turn vastly complicate the planning process.
In the future a more rational distribution of resources, particularly
of labor, will be necessary if hlgh rates of growth of industrial
production are to be maintained.
* Table 9 follows on p. 34.
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Table 9
Comparative Indexes of Average output per Worker
in Selected Ferrous Metallurgical lants in the USSR Ei
1954
Ilants
Kuznetsk CoMbine
MagnitoEorsk Combine
Novo-Taeil'skiy Plant
Chelyabinsk Plant
"Zaporozhstal" Plant
"Azovstal" Plant
Makeyevskiy
Krivorozhskiy
Dzerzhinskovo
Stalina
Voroshil ova
Blast Furnaces Open-Hearth Furnaces
100
122
79
69
55
50
51
42
38
34
N.A.
100
89
52
50
77
57
43
N.A9
43
N.A.
46
B. Future Problems and Policies.
Th i
. e future possibilities for incre sing industrial production by
expanding the labor force and the recent tends in the distribution of
increments to the labor force are illustra.ed in Tables 10* and 11.**
During the period from 1950 to 1955 (inclu lye), nearly 5 million new
workers were obtained from the agrlcuitur4 population. .It is esti-
mated that la 1956-60, only about 1 million to 2.5 million workers can
be added to the nonagricultural labor forc from the =normal increment
to the agricaltural population, and a cons derable number of.petple
with technical educations will be transfer ed to agriculture. Conse-
quently, increased output per worker will iave to account for the bulk
of the increase in industrial production d ring the next few years-
* Table 10 follows on p. 35.
** Table 11 follows on p. 36.
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Table 10
<
Nonagricultural Employment in the USSR
a_ 1946-60
0
Million Workers and Employees
73
ET 1 January 1 January 1 January 1 January 1 January 1 January
1946 1951 1951 1956 1956 1961
Fourth Five Year Plan .(1946-50) 23.7 36.8
? Fifth Five Year Plan (1951-55) 36.8 43.3
? Sixth Five Year Plan (1956-60) 43.3 48.o to 48.5
8
CD0
i3
D
CD
a
a
CD
01
a
a
a
a
a
CD
a
a
a
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Table 11
Total Labor Force in the USSR
1950 to 1 January .956
Mill'on Workers and Employees
Year
Collective Farms
State Agri ulture
Nonagricultural
1950
49.0
2.4
34.8
1951
49.0
2.4
36.8
1952
48.2
2.6
38.2
1953
48.7
2.6
39.1
1954
48.5
4.1
40.7
1955
48.6
5.0
42.0
1956 2/
49.6
5.5
43.0
Preliminary estimate.
Current Soviet policies designed t
labor productivity run the gamut from the
crease the supply of quality foodstuffs; w
incentives for higher productivity; to mea
nological innovation. HThe underlying ass
are necessary to promote the growth of lab
changed since the adoption of the "new cou.
program and the emphasis on improving hous
vide greater incentives to the labor force
During the first 6 months of 1955
increase in emphasis on improved technolog
productivity. 22/ Introduction of new tec
(1) the general diffusion of knowledge and
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promote the rapid growth of
ong-range program to in-
ich presumably will increase
ures designed to speed tech-
ption that greater incentives
r productivity has not
se.11 The current agricultural
ng are both designed to pro-
here has been a significant
as one of the keys to labor
nology has two aspects:
information concerning
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technological developments, and (2) the widespread application of
specific techniques; particularly mechanization and automation.*
These techniques not only have great potentialities in terns
of reducing labor inputs into productive processes but also have a
distinctive ideological and emotional appeal to the Soviet leadership.
Automation in particular promises to become a mystique, to become
charged with more ill-defined overtones of a panacea than was "planning"
in the early 1930s. Soviet leaders look to mechanization and automation
not only to reduce direct labor inputs but also to make possible the
"elimination of the distinction between mental and physical labor" which
they conceive to be essential to the transition from the present
"socialism" to the future "communism." In. other words, even the manual
worker will become a combination of meter reader, maintenance man, and
low-grade engineer. It is also likely that the Soviet leadership an-
ticipates the promulgation of such a vision to strike sparks of interest
and enthusiasm and to improve worker morale.**
* The Soviet concept of automation is comewhat broader than the term
used in the West inasmuch as the USSR tends to apply the term to a
single machine which performs one, or possibly two; operations with
very little assistance from the human operator. In the West, automation
is usually limited to a number of machines which are linked together
and which automatically perform a number of operations; including the
inspection of the quality of the product.
** In the past; the Russians have had difficulty in adjusting mass
expectations concerning the technical training and responsibilities
which would be available to the average worker to what actually was
available. In the 1930's, because of the demands of industrialization
and the Party's desire to relieve itself of dependence upon the tech-
nical intelligentsia inherited from the Tsarist period, great stress
was laid upon the opportunitlies open to all for technical advancement.
The response was a widespread aspiration for higher eduction and the
white smock of the engineer. When, however, the immediate needs for
engineers and technicians had been largely met in the late 1930's, and
it was desired to control entry into this social class more closely,
it was found necessary to limit these expectations; Kalinin complained
eloquently; Who is going to do the hot and dirty jobs?" In subsequent
years the class lines between the workers and the intelligentsia have
been clearly drawn, and movement from the first to the second has been
restricted in order to enhance the prestige of the new managerial class.
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The Soviet desire to eliminate the essential distinction" be-
tween mental. and physical labor complLcates the problem of getting more
capital per unit of output through mechanization and automation. Given
the rate of output specified in the plan as the objective, the Soviet
engineer is told to design machinery which will require engineers and
highly skilled technicians to operate it, eliminating the use of un-
skilled and semiskilled workers if possible. Judging from US experience
and from a few examples of Soviet designs, the same rate of output
usually could be achieved by using machiney of lower original cost and
of lower opErating costs in terms of wages but which would still use
some unskilled and semiskilled labor. Such capital intensive solu-
tions, of course, represent an improvement over the existing combina-
tions of capital and labor but certainly do result in more capital in-
tensive solitions than in. the West, where the primary objective is to
minimize total costs (both capital and labor). Unless sharply modified
in practice; the Soviet theory will tend th slow down the rate at
which the new technology will reduce unit costs. Furthermore, the
introduction of mechanization and automation competes very directly
with the production of military end items for modern weapons systems,'
and the pinch on such industries as electronics and precision instru-
ments can be expected to be severe.
The elimination of the distinction batmeen mental and physical
labor" seemingly is the slogan adopted to dramatize the current policy
on this matter. It appears that, through the provision of more compli-
cated equipment and continuous training o?1 the laboring force, an
attempt is being made to raise the genera level of technical ability
far enough to obtain increased productivi y and to provide some prestige
rewards to the working class. But the prdcess of raising the general
level of technological competence, in its social aspects, must stop short
of destroying the distinctive positioa and special privileges of the in-
telligentsia. Although the current slogan has not yet been widely pop-
ularized (it is, of course, a historic goal, but it fell from prominence
for many years), it will probably come inCreasingly to the fore. This
development is related to current revisiors of the 10-year school cur-
riculum in the direction of increased vocational training in the
future, 10--,!rear education is to become universal and is to be aimed not
only at entrance into universities but chiefly at manning the labor
force with personnel falling in the range between skilled workers and
technicians.
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The prospects for achieving a more rapid growth of labor produc-
tivity in the next 5 years, and an increase of 50 to 60 percent compared
with about 40 percent officially reported for the 1951-55 period; may
be assayed briefly. The Soviet leaders should be successful in increas-
ing the flow of technical knowledge, improving the general level of
technology in the economy; and reforming the wage system; although
there will be strong institutional pressures to abuse the system of
premiums and bonuses. All these things should do much to promote the
growth of labor productivity. Two crucial problems remain; however.
First; there is by no means any guarantee that increased output of
quality foodstuffs; which will increase mass incentives; will be forth-
coming and, second; the ability of the planners to insure the necessary
degree of improvement in the general technological level of the economy
may well be limited by the competition of modern weapons systems.
V. Cost Reductions and Technological Progress.
A. Cost Reductions and Investment Surplus.
There are several measures of efficiency which are quite im-
portant in assessing Soviet plan fulfillment. All Soviet production
schedules are based on anticipated cost reductions and increased pro-
ductivity of capital as well as on the planned allocations from current
account. In the current Five Year Plan; for example; Of the 90-percent in.-
crease planned in the volume of investment, one-third was to be
achieved by reducing total investment costs (1951-55 compared with
1946-50) and two-thirds by increasing allocations from current
account. Probably the most important efficiency measure is the re-
duction in aebestoimostv (cost of production*) of industrial produc-
tionl_which includes the value of raw materials and semifinished
goods, fuel and power;.wages; an amortization allowancel** and certain
administrative expenditures. This cost reduction is the difference
* -Sebestoimost';the accounting category which is the basis for most
Soviet pricing and cost accounting; cannot be directly translated.
The closest approximation is our concept of total cost with the qual-
ification that under the Soviet _system fixed costs are geared more
closely to production than is common in the West.
** The Soviet amortization allowance includes repair and replace-
ment of capital equipment but does not contain- an obsolescence factor,
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between the actual cost of production in gear II and the total cost of
production :xi year II calculated on the b sis of cost per unit in Year
I. Such reductions in the cost of industrial production increase the
state surplus available for investment and defense and provide the
basis for price reductions in producer goOds and military end items.
Price reduc-Lions for producer goods?1- raw materials, and semifinished
goods together with reductions in construction costs make possible a
greater increase in real volume of investMent than is indicated by
the allocat.ons from current account. The yearly decline in the
aggregate sebestoimost? of industrial pro uction is shown in Table 12.
Table 12
Reduction in the -Total Cost of Industrial Production in the USSR
1951-55
Percent
Cumulative
Percentage Reduction from Preceding Year Four-Year
1955 Reduction
1951 1952 1953 .1954 (6 Mont.I.ST Plan) (l952-
LA. a/ 8.0 5.0 4.o 3.8
.5)
19.0
Five Year
Plan
(1951-55)
25.0
a. The total reduction in 1951 was not reriorted in percentage terms.
The Soviet press, however, did report that savings from cost reductions,
excluding the savings from the reduction in wholesale prices of raw
materials and semifinished goods, amounted to 26 billion rubles.. Ap-
parently, moEt of the savings from 1951 price reductions were passed on
to provide the unusually large reduction in 1952.
As indicated above, planned cost rieductions for the 1951-55
period were to amount to 25 percent (aggr gate production in actual
costs compared with aggregate production ib 1950 costs). If 1951 is
* Price reductions in consumer goods are !derived primarily from the re-
duction in the turnover tax, although red tion of the sebestoimost? of
processing may be a factor. In general) te rate of profit decreed by the
state is hiEher in the consumer goods indu1stry than in heavy industry.
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excluded from consideration and if it is assumed that the rate of de-
crease during the first half of 1955 is representative of the entire
year, the cumulative cost reductions for the 1952-55 period will amount
to 19 percent. Even allowing for the savings in 1951, it is now doubt-
ful if the economies planned for the 1951-55 period will be achieved.
,Reductions in production costs will assume even greater impor-
tance in the next 5 years than in the past because they are one of the
principal means of increasing the state surplus -- that is, that part
of the difference between production and consumption (in a given time
period) which is available to the state for investment and defense.*
According to Soviet accounting practice; this surplus consists pri-
marily of the profits of state enterprises and the turnover tax. .Re-
ductions in sebestoimost', together with increased volume of production,
increase the prOfits of enterprises and hence the state surplus. Trends
in the growth of this surplus and the demands made upon it by invest-
ment and defense are illustrated in Table 13.** It will be noted that, in
the 1952-54 period, the surplus grew at a slower rate than did the de-
mands upon it. The same process is also expressed in the growth of
real wages at a faster rate than labor productivity during the same
period.
In recent years the share of the state surplus derived from the
turnover tax has been declining rather rapidly; this has been compen-
sated for by profits of enterprises, which in turn are heavily dependent
upon cost reductions. .This trend is illustrated in Table a4** and is
in sharp contrast to the Fourth Five Year Plan, when almost the entire
surplus was derived from the turnover tax, -Furthermore, during the
immediate postwar period almost the entire turnover tax was levied on
goods which were agricultural in origin, serving ,as a vehicle for ex-
tracting the bulk of the state surplus from the economy as a.whole.
* This assumes, of course; that consumption as a proportion of
national income remains the same. The definition of the state surplus
as used here corresponds to the Soviet concept of "net income" of the
state; it should not, of course, be confused with the budget surplus.
Private savings are excluded, as are private and collective farm
investments,
** TableS.13 and 14 follow on p. 42.
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Table 13
Trends in the Formation and Use o
in the USSR
1950-55
the State Surplus
1950 = 100
1950 195 1952 1953 1954
Income to surplus 2/ 100 107
Expenditures from surplus12/ 100 105
1955
(Plan)
110 111 111 125
113 115 118 121
a. Turnover tax collections plus total profits of state enter-
prises.
b. Explicit defense expenditures plus total investments in state
enterprises.
Table 14
Turnover Tax as a Proportion of
in the USSR
1950-55
State Surplus
Percent of Total
1950 1951 1952 1953
78 77 75 73
Industrial profits probably were outweight
1946-49 periDd. Since 1951-52, however, t
cultural sector has leveled off and may ha
creased proclrement prices and the grcwth
agriculture. Retail price reductions (car
lug the turnwer tax) have tended to reduc
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1955
1954 (PlEal
67 62
d by subsidies during the
e contribution of the agri-
e declined owing to in-
f other state outlays for
ied out prima:rily by reduc-
the contribution of urban
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consumers, The declining contribution of the agricultural sector to
the investment _surplus while the industrial base is expanding rapidly
poses a serious long-run growth problem for the Soviet planners and
increases the importance of cost reductions in industry as a com-
pensating factor, It can be anticipated that the planned reductions
in sebestoimost? of industrial production in the 1956,-60 period will
be at least 25 percent and .probably more. ?The capability of the
economy to reduce costs is; of course, heavily dependent upon the
rapid growth of labor- productivity; which has been lagging seriously
throughout the 1951-55 period. -Moreover; the political unpalatability
of increasing retail prices and resorting to heavy income taxes will
make it difficult to reduce consumption; and, thereby increase- the
state surplus by such means..
B. Efficieheasures.
Several measures of utilization of capital equipment are con-
sidered sufficiently important to be reported in the annual plan ful-
fillment announcements.. ?Plans for production of capital equipment
inputs necessary to achieve final output goals are based upon the
anticipated economies in the uge of the existing stock of capital
equipment in each time period, Among the most important efficiency
measures are production per cubic meter of blast furnace volure and
coal input per kilowatt-hour of electricity. Efficiency trends .for the
Fifth Five Year _Plan are indicated in Table 15.* Although progress
has been stbstantial; most of the cumulative 5,year efficiency goals
probably will not be reached. The failure after 1951 to report
improvement in the utilization of coal combines probably indicates that
in fact no improvement occurred. In general; the coal industry has
been operating quite inefficiently despite the fact that gross_ output
goals will be exceeded. _While improvement in. .efficiency of use of
existing capital stock will continue to be a very important aspect of
planning; more rapid and. comprehensive introduction of new technology
is necessary if the Soviet planners are to count on continued rapid
.improvement of efficiency in the future.-
* Table 15 follows on p. 44.
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0_
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a )
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CD
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".4
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(A)
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6
Trends in the Improvement of Production Efficiency
in Certain Key Industries in filF> nqqp.
1951-55
Percent
Production of pig iron per cubic
meter of blast furnace volume
Production of crude steel per
square meter of open-hearth
furnace area
Productivity of coal combines
Speed of drilling in proved fields
-Gut-put?of electrI7c power per unit
of coal input
Increase in Yield per Unit of Input
_
Cumulative
First Half Target
1951 1952 1953 1954. of 1955 (1951-55)
5 5 2 4 5 30
5 3 5 3 5 25
19 N.A. N.A. N.A. N.A. N.A.
4 5 5 N.A. N.A.
N.A. 2.4 1.9 2.6 N.A.
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Increase
Required
in 1955
10
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VI. Agriculture.
The semiannual plan report gives impressive data concerning incre-
ments to the input side of the agricultural economy. A: remarkable
increase in sown acreage, an increased flow of agricultural machinery,
and a marked improvement in the quality of the machine tractor station
managerial class are indicators that concrete efforts are being made
to increase output.
The increase in sown acreage of all crops of the 1955 harvest
probably will be about 22 million hectares, a gain of more than 13
percent above last year. The actual acreage increase of the 7 or 8
crops listed in the plan report exceeds by 5 million hectares the net
increase in acreage. This is probably the result of a decrease in
perennial grasses and low-yielding small-grain acreages in favor of
corn.
Besides a fourfold acreage increase in corn, sowings of the other
heavily emphasized grain crop, wheat, also increase) perhaps by as much
as a quarter. Most of the wheat increase was accomplished in the
overfulfillment of the "new lands" expansion plan. Sizable increases
in area planted to other important food crops, such as potatoes, sun-
flowers, and sugar beets, and to flax were in line with plans announced
since the initiation of the "new course."
The one significant negative aspect of this acreage expansion is
the large increase in labor required to care for these crops. The
acreage increments to relatively high labor-consuming crops such as
corn, flax, sugar beets, and potatoes in the traditional agricultural
regions and the demands on these settled regions to send manpower
to open up the unsettled "new lands" regions are undoubtedly causing
temporary labor shortages, Press complaints this year on the lag in
such operations as haymaking indicate that local farm managers are
being forced to give priority to the cultivation of corns for example,
rather than to the timely cutting of hay. The problem of labor short-
ages probably will be at its height during the grain harvest.
Although. 1955 is the second year of the "new lands" program for
the extension of area sown to small grains in Kazakhstan and West
Siberia, this is the first year in which the acreage is of nationally
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significant proportions -- 20 million hectares (roughly one-sixth of
total grain acreage). The lack of ra:Lns iia the late spring and early
summer indicates that grain yields in the "new lands"' will be at or
below the lcw average characteristic of the region. Unpublished
comments made recently by a high Soviet agriculture official indicate
that the Soviet planners are well aware of the limiting factors
(mostly low rainfall) in crop cultivation in.these areas but believe
that the venture will be profitable because of low labor and material
expenditures per sown hectare. Khrushchev has indicated that the
planned ,'break-even point" is an average yield of 4.8 centners of
grain per hectare, which is approximately the long-run average yield
in this area. This required average yield; is too low, if past ex-
perience with planning the cost of state f' rm production can be used
as a criterion. Operational and investment expenditures on state
farms, the primary unit in the "new lands," have always been abOve
the planned level of cost per unit of outp t. The success or failure
of the "new lands" program may depend on w ether the Russians can
increase labor and capital productivity to a point where cost of
production to the state in the "new lands" will be below costs in-
curred in the non-black-soil regions 't.' European USSR.
Machinery allocations for the first 6 iionths were at a higher an-
nual rate than for the previous year. Esp cially prominent is the in-
crease in allocations and production of la or-saving machinery for the
cultivation of "new" crops such as corn and formerly unmechanized
crops such as potatoes and vegetables. Aslis indicated by the republic
plan reports, most of the large diesel tr4tor and, grain combine
allocations are going to the "new lands." Although production of corn-
harvesting combines was tripled compared 14'.th the first 6 months of
last year, tee harvesting of this crop will be mostly unmechanized at
least for this crop year. The lack of sufficient peak season labOr
in cutting and ensilaging undoubtedly will lead to large fodder losses
and to lower feed value for the silage.
The plan to increase the quality Cf th rural elite or managing
class apparently is being met, if one uses the criterion of educational
background. Ninety percent of the directors of machine tractor
stations now have special secondary or higher educational training,
and 70 percent of the chiefs of repair sh ps are now in the upper
educational 'orackets compared with 36 perc nt and 10 percent, re-
spectively, Ln 1953. No indication was gi en as to how successfully
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the plan is being carried out to make 1 out of every 3 collective farm
chairmen a Party technician from the urban areas. .This plan, first
announced in April, calls for the staffing of 30,000 backward collec-
tive farms with chairmen of Party and usually nonagricultural experience.
In the livestock sector the most notable success has been the rais-
ing of milk production during the nonpasture season of October to May,
when as little as 20 percent of the annual milk production is usually
produced. There is no indication that there were sizable increases
in holdings of livestock of individual owners. One of the key incen-
tives given the peasants early in the post-Stalin era was the official
encouragement, including financial aid, to restore the depleted hold-
ings of privately owned. livestock. After large gains in these holdings
over the 1953-54 period, there now seems to have been a levelling off,
suggesting that feed was in such. short supply after the regional
droughts last summer that many private owners had to dispose of hold-
ings during the winter.
VII. .Trade and Consumption.
A. .Trends in Retail Trade.
Sales of goods to the population for the first half of 1955 are
reported only 8 percent above (in comparable prices) those for the
first half of 1954; these, in turn, had been reported 21 percent above
those for the first half of 1953. This significant drop in the rate
of increase probably reflects a diminished ability to exploit with-
drawals from state reserves as well as a possible reluctance to in.-
crease greatly imports of consumption goods.
Inasmuch as the plan is reported fulfilled, this decrease prob-
ably means that the Russians, forced now to rely chiefly upon current do-
mestic output for the supply bf goods for sale (see B, belcw),'anticipated
in their planning a tighter availability than in 1953 and 1954. If
this is so, the growth of sales is as rapid as is possible with current
production rates, wtich are restricted both by a limited past invest-
ment in facilities for production of consumer goods and by lags in the
growth of agricultural. output, which provides most of the material
input for consumer goods production.
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Generally speaking, the individual items and categories of items
which comprise the bulk of retail trade show a significantly diminished
rate of sales growth for the first half of 1955 compared with the rate
of increase for the first half of 1954 (se Table 16).
Table 16
Trends in Retail Trade TurnoTer in the USSR
Selected Items
First Half of 1954
as percent o
First Half of 953
First Half of 1955
.as Percent of
First Half of 1954
Meat and me lt products
130
106
Fish and fi 3h products
124
120
Milk and mi. Lk products
121
112
Cotton fabr Lcs
119
110
Clothing
124
118
Knitted goo. is
124
113
Footwear-2/
115
io6
Sewing mach Lnes
131
117
Furniture
137
117
Bicycles
129
120
a. For 1954, leather footwear.
Besides the supply constrictions o
demand also was somewhat curtailed during
addition to ,;overnmental fiscal measures d
assets held by the populace -- for example
loan -- effeotive demand was influenced by
with some prospective purchasers probably
certain item:; (particularly durables) in a
price reductIon before the middle of the y
failed to ma-;erialize (though some few red
locally publIcized, in the cost of certain
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? sales, it is likely that
he first half of 1955. In
signed to blot up liquid
the increase in the state
consumer expectations,
?elaying their buying of
?ticipation of a general
ar -- a reduction which
ctions occurred, and were
television sets and radios).
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The general demands of the population are reported as still
being met inadequately, both in respect to the aggregate amount of
goods available in certain areas and in respect to the assortment of
Items offered, such as food and clothing.
Progress in the development of rural trade was not mentioned
In the official plan fulfillment report. Subsequently, consumer coop-
erative trade -- predominantly rural -- was reported to have grown
13.5 percent over the first half of 1954, representing a 101-percent
fulfillment of the plan. These figures include commission trade.
Excluding commission trade, the increase was slightly less -- 12.4
percent.
B. Trends in Consumption Availabilities from Production.
Inasmuch as sales trends increasingly depend upon the trends of
current domestic production of consumer goods, these production trends
must themselves be examined- Whereas the growth of retail sales has
dipped from its 1954 high, general availability of goods from current
production continues to grow at a fairly constant rate.* Growth in
availability of the major categories of consumer goods is shown in
Table 17.**
* These indexes are computed on the basis of adjusted physical. pro-
duction estimates Tof significant items .of consumption, weighted by
their current ruble prices. The rough preliminary comparison of the
annual growth rates of the first half of 1955 with the 1954 rates is
computed by applying announced percentage production increases for the
first-half of 1955 to the appropriate figure in the array of 1954
price-quantity products. -These adjusted products are summed and. the
totals compared with the 1954 totals. This preliminary comparison, of
course-, has limited reliability the first-half-of-1955 annual rates
are compared with full-year rates for 1954, and for such commodities
as are not reported. it iS assumed that the 1955 rate will be the same
as the rate for 1954. Thus, if 1955 is a better crop year than 1954,
this comparison will understate the full-year growth -- pay of wheat,
.which naturally was not reported but which plays a large role in the
index.
-** Table 17 follows on p. 50.
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Table 17
Trends in Availability of Consumer Good
in the USSR
from Current Production
Category
Calculated
Weights.
Year 1954 as Pe
of Year 195
Food products
55
10-';
Clothing
111
Manufactured
consumer goods
4
125
Total
100
107
Annual Rate .
cent for First Half of 1955
as Percent of Year 1954
lo4
107
111
105.5
The dips in growth for 1955, of co rse, are in manufactured
consumer goods and clothing; food products actually increased at a
higher rate than in 1954. .That agriculturl production is a basic prob-
lem should be clear from the fact that foo production, though in-
creasing, is growing at a rate significant y below other consumer goods.
Because of its weight, therefore, this slati growth constitutes the
majOr drag on increases in the living standard.
C. Investment in Trade Activities.
The amount of Soviet investment in
the pattern of this investment is fairly c
trade net, two aspects are currently empha
of facilities in the area of the virgin la
and a considerable amount of investment in
to construction of new facilities to repla
older areas of the. USSR.
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trade is unreported, but
ear. In developing the
ized: extensive development
ds enjoys high priority,
trade activities is devoted
e obsolete stores in the
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VIII. Transport.
A. Trends in Goods Haulage.
' The aggregate volume of goods transported during the first half
of 1955 increased significantly over the first half of 1954, even
though the precise increase cannot be determined on the basis of the
report of plan fulfillment.* The increases in average daily loadings
by rail were appreciable, and in cargo turnover and cargo carriage by
the seagoing merchant fleet were the highest that have been reported
during the period of the Fifth Five Year Plan (see Table 18**). The
half-year plan was markedly overfulfilled for these two modes of
transport, which together haul about 90 percent of the volume of
Soviet transport. Although substantial gains are reported in river
and motor transport, the increases fall somewhat short of the plans
in each case (except for overfulfillment of the plan for bus passenger
transport).
The above-plan increase in aggregate carriage may reflect, in
addition to overfulfillment of the plan. for industry as a whole., a
possible Soviet tendency to solve crash production problems by means
of increased transport inputs rather than by means of higher levels of
plant inventories of scarce raw materials. Given ample capacity in
the transport plant, such substitution might involve less current
outlay than would an increment to the materials inventory.
The plan for increasing the average speed, of freight trains,
a goal unfulfilled for some time,. was fulfilled in the first half of
1955. Fre1ght7car turnaround time was also reported, decreased. These
two operating factors are related, to the announced 9-percent increase
in average daily. loadings, one of the highest reported in the post-
retonstruction period. This is especially significant because of the
large proportion of total transport that is handled by Soviet railroads.
* However,.as an approximation and based on average daily loadings-by
rail and cargo turnover data for other modes of transport, aggregate
transport plan fulfillment is almost 102 percent. Similarly? total
volume of traffic is about 111 percent of the first half of 1954.
Weights used are as follows: rail, 85; merchant fleet, 5; river
fleet, 6; and motor transport, 4..
?** Table 18 follows on, p. 52.
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Table 18
Trends in Transport Activit
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n the USSR
Percent of Plan
Transport Increase
Fulfillment over Previous Period
First Half First Half
Transport (ctivity of 1954 of 1_955
Rail
Average daily loading
Merchant fleet
Cargo turnpver
Cargo carriage
River fleet
Cargo turn)ver
Cargo carriage
Motor transpprt
102 fil
103
102 1 6
93 102
82
N.A.
Cargo turnover 103 5
Cargo carriage 101 9
Bus passen3ers 108 1Q6
1954
First Half
of 1955
10612/
109
118
130
106
118
106
108
111
100
166
135
175
150
N.A.
148
a. Not give:1; figure relates to full year 1954 and 1953.
.b. Figure r,?.lates to first half of 1954 aid first half of 1953.
The increased-volume of goods tran ported by the merchant fleet
accompanies a general rise in Soviet forei n trade activty which
persisted in:o the first half of 1955. Th increased volume of cargo
also reflect;3 increasing POL transport by Soviet bottoms as well as in-
creasing dry cargo movements between the Far East and the European USSR.
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The shortfalls from river fleet transport plans probably are in
good part a consequence of the unusually late thaws of the 1955 spring.
The primary regions for river fleet operations are extremely vulner-
able to weather conditions. It should be noted. that the shortfalls for
the first half of 1954 were even larger than those aurrently reported --
yet the 1954 full-year plan was met.
The reported shortfalls from the very high planned increases
in motor transport for 1955 are not large. In fact, the physical vol-
ume of the increase probably is significantly larger than that of the
comparable 1954 period over 1953. These high targets clearly highlight
the sharply increasing reliance of Soviet economic planners upon motor
transport to provide urban dray services and rural railhead. access.
B. Transpat investment.
Because of its paramount role in the movement of goods and
persons in the USSR, rail transport absorbs the bulk of transport in-
vestment. Such investment may take place in three major directions:
extension of rights-of-way; the improvement of fixed plants and fa-
cilities (such as signal systems; marshalling yards, or depots);;and-
expansion and improvement of the rolling stock park. The first of
these, by expanding the territory of service, is considered. to involve
extensive development. The latter two generally are considered to
involve intensive improvements.
-Under Stalin the. railroads of the USSR were rapidly extended in
an effort to keep pace with the geographic dispersion of economic
activity and. the widely publicized emphasis upon Siberian development.
.In the investment review that occurred. immediately after Stalin's death,
the policy seemed to have shifted to give less emphasis to the rapid
laying of new trackage and more emphasis to improvement of the existing
plant and equipment park. Total transport investment increased, how-
ever, Data reported for the first half of 1955 indicate continuance of
this policy (see Table 19*). The electrification..and dieselization
programs are clearly reflected in the above figures. The drop in out-
put of steam .locomotives is probably temporary owing to model changes..
* Table 19 follows on p. 54.
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Table 1.9
Trends in Production of Transport Ro
ing Stock in the USSR
First Half or 1954 First Half of 1955
as Percentlof as Percent of
1953 First Half of 1954
Item
First Half o
Mainline electric locomotives
104
Mainline diesel locomotives
N.A.
Mainline steam locomotives
131
Mainline freight cars
N.A.
Trolleybuses
109
Motor trucks
110
Autobuses
168
The Ministry of Transport Construe
creased the volume of its construction-ass
half of 1955 by 4 percent over the first
half the 1954 increase. This is the small
122
121
84
138
113
112
100
ion is reported to have in-
mbly work for the first
if of 1954, or about one-
at increase reported for
any of the construction ministries and repl'esents underfulfillment of
the plan. Since this ministry is principally concerned, of course,
with the extension of rights-of-way and th ir improvement, this rel-
atively small increase in construction-ass mbly work reflects contin-
Uation of the relatively slight emphasis oil extension of the transport
net.
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APPENDIX
SOURCE. REFERENCES
This memorandum is based on Soviet plan fulfillment reports/ issued
quarterly through 1952 and semiannually thereafter, and on CIA analyses
of the mid-,1954 report.
All data in this memorandum? unless otherwise indicated, are taken
from the annual and sendannual Soviet plan fulfillment reports. These
reports appeared in the Soviet press on the following dates: 21 Janu-
ary. 1947, 18 January 1948, 20 January 1949, 18 January 19501 27 January
1951, 29 January 1952, 23 January 1953/ 17 July 19531 31 January 19541
23 July 1954, 21 January 1955, 22 Okay 1955, and Premier Bulganin's
speech in Pravda, 17 July 1955 Translations of these reports, beginning
With the annual report for 1948, appear in the following numbers of the
Current Digest of the Soviet Press: 1948 annual: Vol. 1, No. 4; 1949
?6-;:1-4.Voarinr.W.Lal: Vol. III,No. 3; 1951 annual:
Vol. IV) NO. 3; 1952 annual VoL V, No. 2; 1953 semiannual: Vol. V,
No. 27; and. 1953 annual: V014 1/1, No, 5.
All. Soviet newspapers, books, and journals are considered to be
highly reliable sources of economic information. The FBIS publica-
tions are primarily translations, and slight errors in broadcast
Intercept as well as in subsequent :translation make them slightly
less reliable sources than the originals.
valuation, following the classification entry and ,designated'
uEval.?'" have the followingeignificance:
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Sou-ce of Information Information
Doc. - Documentary
A - Completely reliable
B - Usually reliable
C - Fairly reliable
D - Not usually reliable
E - Not reliable
F - Cannot be judged
1 - Confirmed by other
2 - Probably true
3 - Possibly true
4 - Duatful
5 - Prcibably false
6 - Cannot be judged
S ources
"Documen-;ary" refers to original documnts of foreign governments
and organiza-Aons; copies or translations cif such documents by a staff
officer; or :mformation extracted from such documents by a staff
officer, all of which may carry the field evaluation "Documentary."
Evaluations not otherwise designated are those appearing on the
cited document; those designated 'RR" are by the author of this
memorandum. No "RR" evaluation is given when the author agrees with
the evaluation on the cited document.
1. USSR, Verkhovnyy:Sovet SSSR. Zasedaniya verkhovnogo soveta
SSSR, chetvertogo sozyva, vtoraya sessiya, stenograficheskiy
otchet (Proceedings of the Supreme Soviet of the USSR, kth
Meeting, 2d Session: Stenographic Report), Moscow, 1955,
p. /75-476. U. Eval. RR 1. (hereafter referred to as
USSR, Verkhovnyy Sovet SSSR. Zaseldaniya)
2. CIA. CIA/RR IM-411, Soviet Plan F91fillment, 1954, 5 Jul 55,
Tab-e 1, footnote d, p. 6. s.
3. Pravda, 17 Jul 55. U* Eval. AR 2.
4, USSR, Verkhovnyy Sovet SSSR. Zasedaniya (1, above).
5. Klimenko, K. "0 putyakh povysleniyta proizvoditel'nosti
trucLa v mashinostroyenii" (On Ways to Increase Labor Produc-
tiv:ty in Machine Building Industries), Voprosy ekonomiki,
no 5, 1955, p. 21i. U. Eval. PR 1.
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Pravda, 17 Jul 55. U. Eval. RR 2.
7. Perovskiy, N. "Vnedreniye peredovoy tekhniki vo vse otrasli
proizvodstva" (Introduction of New Technology into All
Branches of Production), Planovoye khozyaystvo, no 3, 1955,
p. 3. U. Eval. RR 2.
8. Izvestiya, 8 Feb 55, P. 3. U. Eval. RR 2.
9. CIA. CIA/RR 37, The Role of the Tractor Industry in the
USSR, 1940-54, 16 Aug 54. S.
10. Ibid.
11. Ibid.
12. Klimenko? aa. cit. (5, above).
13. Ibid. p. 23. U. Eval. RR 1.
14. Gatovskiy, L. "Rol sovetskoy torgovli v sotsialisticheskom
vosproizvodstve" (Role of Soviet Trade in Socialist Repro-
duction), Kommunist? no 9, 1955, p. 33. U. Eval, RR 1.
15. Khromov, p. "Povyshentye prolzvodite1'nosti obshchestvennogo
truda" (Increasing the Productivity of Social Labor),
Voprosy ekonomiki, no 4, 1955, p. 65. U. Eval. RR 1.
Pashko? Ioyand Kheyman? S. "0 reservykh uvelicheniya
protzvodstvo chernykh metallov v SSSR" (On the Reserves for
Increasing the Production of Ferrous Metals in the USSR),
Voprosy ekonomtki, no 4, 1955, p. 87. U. Eval. RR 2,
Kommunist, no 7, 1955, p. 10, U. Eval, RR 1.
16. Khromov? op. cit. (15, above), p. 72, U. Eval. RR 2.
17. Kozlova, 0. IlTahnicheskiy progress i rost kultturno-
tekhnicheskogo urovnya rabochikh" (Technical Progress and
the Growth of the Cultural-technical Level of the Workers),
Voprosy ekonomiki?no 6, 1955, P- 32. U. Eval. RR 1.
18. Pashko and Kheyman, op. cit. (15, above), p. 88. U. Eval. RR 2.
19. Khromov, op. cit. (15, above), p. 63. Ti. Eval. RR 2.
Kommunist, no 7, 19552 p. 6. U. Eval. RR 2.
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