COMPUTATION AND RELIABILITY OF PLAN RESULT FIGURES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80S01540R005800040022-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 23, 2016
• Document Release Date: February 19, 2013
• Sequence Number: 22
• Publication Date: July 22, 1954
• Content Type: REPORT

Declassified in Part - Sanitized Copy Approved for Release 2013/02/19:
CIA-RDP80S01540R005800040022-6
Declassified in Part - Sanitized Copy Approved for Release 2013/02/19:
CIA-RDP80S01540R005800040022-6
Declassified in Part - Sanitized Copy Approved for Release 2013/02/19: CIA-RDP80501540R005800040022-6
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CENTRAL INTEL,LIGENCE AGENCY
INFORMATION REPORT
I.
c?:F
50X1 -HUM
Chia Document contains information affecting the Na-
tional Defense of the Unitod States, within the mean-
ing of Title 18, Sections 793 and 794, of the U.S. Code, as
amended. Its transmission or revelation of its contents
to or receipt by an unauthorized person is prohibited
by law. The reproduction of this form is prohibited.
SECRET/CONTROL - U.S. OFFICIALS ONLY
50X1 -HUM
COUNTRY
;SUBJECT
? DATE OF INFO.
PLACE ACQUIRED
Hungary
REPORT
-Computationand.Reliability DATE DISTR.. 22 July 1954
of Plan Result Figures
? NO. OF PAGES 1 . 50X1 -HUM
REQUIREMENT
'THE SOURCE EVALUATIONS IN THIS -REPORT ARE
THE APPRAISAL OF CONTENT IS TENTATI
XXX XXXXXXXXXXX
REFERENCES
11111166'
Note: Washington Distribution Indicated By "V; Meld Distribution By "*".) Form No, 51-61 XAnuary 195T . 50X1 -HUM
The attached report concerning the computation and reliability of plan
result figures is forwarded to your office for retention.
Enclosure: 1 report (4 pages)
To: ORR
SECRET/CONTROL - U.S. OFFICIALS ONLY
STATE
ARMY
NAVY
AIR
FBI
AEC
OCD
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- Sanitized Copy Approved for Release 2013/02/19 : CIA-RDP80S01540R005800040022-6
SECRET CONTROL
U.S. OFFICIALS Cil11
G A R Y..
. Economic
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The. Computation . and Reliability of Plan Result Figures
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1. The reliability of Plan result figures, quite apart from deliberate
falsification by the central authorities, is seriously affected by the
divergence between the official theory of the system of computation and its
verking in practice.
0
THEORY
The theory of the system is as follows:-
a) Production Value Plan prices: (termelesi ertelc tervarak):
_
A catalogue, in three volumes, is published by the Planning
Office Press Tervgazdasagi Konyvkiado), 8 Grof Teleki Pal-utca,
BUDAT7IST V, containing a list of all commodities, whether pro-
? duced in Hungary or imported, with their respective 'Production
Value Plan Price'. These prices have not been amended silice they
were laid down in 1948.
b) RePorts by Individual Concerns
All Production concerns submit reports, containing both the
quantities produced and their money values according to the
'Production value plan prices', to their parent Ainistry once a
month or, in the case of important products, once every ten days,
(i) Concerns with different lines of production report
their results for each line separately as well as for their
total Production, (e.g. a metallurgical works has to report
separately the quantities and values of pig-iron production,
crude steel production, foundry production and rolled steel
production, as well as those of total production).
(ii) Production for armaments has to be reported quite
separately; whether the whole or only part of a conern's
nrodul!tion is for armaments. These reports go to tpecial
sections in the Ministry resnonsible for directing arma-
ments prcduotion.
a)
Compilation of Statistics in Ministries
In each Ministry the reports coming in from concerns are
received by the Statistics. Section (part of the Planning Division),
who combine the figures according to the type of product and prepare
Monthly Statistical Reports. ?
(i) In the Ministry of Metallurgy and Mechanical Engineering,
for example, the Statistics Section (leader Mihaly KATDOR) is
subordinated to the Planning Division which is responsible to
the First Deputy Minister. In the section stencil copies of
the Monthly Report are made in the duplication room (leader
Istvan MATUTA), and the Report, classed as Top Secret, is pre-
pared in 40 numbered copies
(ii) Armaments production is not included in the above
Monthly Renort, but compiled in a separate Monthly Report
prepared by, anh,available only to, Directorates I and II of
SECRET CHTROL /the Ministry ....
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the Ministry, who have a statistical section of their own
(leader Mrs. Sandor JUHASZ). Stencil duplication is
carried out by a special duplication room (leader Tibor
KOVACS) belonging to Directorates I and II.
d) Collation of Statistics b the Statistics Office
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From the Ministries the Monthly Statistics Reports go to the
Statistics Office (Sztatisztikai Hivatal), 5/7 Keleti Karoly-utca,
BUDAPEST II. The Statistics Office works out the total results,
submits them to the Council of Ministers and Party Headquarters,
and also submits proposals for the quarterly and annual Plan
results and indices to be published. After approval by the Coun-
cil of Ministers, the figures are released for publication.
(i) The records of the Statistics Office are accessible
only to officials with special authorisation, who are
allowed to take away copies of records on loan provided they
are returned on the same day.
(ii) No reports or records of armaments production are
dealt with or held by the Statistics Office, It is believed
that these must go to the Ministry of War.
3. PRACTICE
In practice, the following divergencies from the theoretical system
all affect the reliability of the final figures:-
a) Plan Prices
In addition to the 'Production Value Plan Prices', which are
constant, two other types of prices are used in invoicing and
accounting, which are variable, The complexity of these three
prices and the resulting confusion in accounting, intentional or
unintentional, are systematically exploited by managements and
workers to enhance production results,
The two other variable prices are as follows:-
(i) 'Cost Price' (orkoltsegi ar): i.e. the actual cost
of production. This is a vague and unreliable value, as
hardly a single concern in Hungary is capable of estab-
lishing true costs of production, awing to the following
reasons:
A) Managements are not interested in their true
cost prices, as their performance is judged by "current
prices" (see below),
B) Accounting departments are not well-organised and
incapable of coping with the complexities of keeping
accounts with three different price schedules and with
separate break-downs for armament products.
(ii) 'Current Price' (folyo ar): i.e. a level of prices
authorised for each product by the Planning Office or the
Ministry concerned, The 'Current Price' may be above or
below the 'Production Value Plan Price', (In the
metallurgical industries both the 'Cost Prices' and the
'Current Prices' are generally above the 'Flan Prices1.).
b) At Pr Level
(i) Double Counting: Many concerns have separate lines
of production, materials passing from department to depart ent
/In the various
Mt, E'FW.LZ'
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in the various stages of manufacture. This provides an
opportunity of including the same material more than once
in the returns, and thus falsifying the production figures.
Even if an attempt were made to allow for this falsification,
it would be practically impossible to do so.
(ii) Rejects: Another opportunity for falsifying production
figures is in the quantities and values of rejects materials
-which are included in the Production Reports.
(iii) Stock-taking: There is frequent falsification in the
assessments of partly finished products.
(iv) Lack of Control: The figures in the Production Reports
are not checked effectively. The inspectors employed for
this purpose are mostly inexperienced; and lacking in the
moral courage necessary to oppose managements, workers and
local Party representatives whose careers and pay packets are
benefited by these falsifications.
(v) Armaments: The fact that production for armaments has
to be reported separately enables those concerns which work
partly for armaments and partly for civilian requirements to
include items in both returns.
c) At Ministry Level
There is no reason to believe that figures are systematically
tampered with in the Ministries, but there is a great deal of con-
fusion. Two examples can be given:-
(i) On one occasion, the Minister for Metallurgy and
Mechanical Engineering was shown figures for reject materials
Which differed considerably from those given in the reports.
(ii) On another, it was found in the same Ministry that
production for a certain month had been computed at 'Cost
Price', while the value of rejects was at 'Plan Prices'.
a) At Tu _Level
There is no proof that the Statistics Office, in consultation
with the Council of Ministers and Party Headquarters, falsify the
published indices. But, in the opinion of all thinking people,
there is ample circumstantial evidence that the figures published
are doctored in order to mislead both the internal population and
those in the 'qest who are trying to evaluate Hungary's industrial
potential.
The following examples of the published Plan results being used
for propaganda can be given:
(i) The case is known of one quarterly period in which
metallurgical production had been bad, but nevertheless, to
encourage the workers, the published indices suggested that
the targets had been exceeded. It was found that the figures
for rejects 'had been entirely left out by the Statistics Office.
(ii) During the same period the published returns for coal
production showed a decrease, although in fact production had
increased. This was because the Government wished to increase
the coal workers' efforts by proving to them that they had been
slack.
(iii) In another case, where a large advance over the
preceding year was published for a particular line of production,
/it was found
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it was found that the figures of two years earlier had been
taken as the basis for comparison.
(iv) Before the Ministry for Metallurgy and Mechanical
Engineering was set up, the Ministry kir Medium Engineering
was responsible for all armaments production. Gyula KOVACS,
head of the secretariat of the latter Ministry, was once
twitted by a fellow official because the Medium Engineering
Plan had only been fulfilled by .975. KOVACS replied, "Look
at the U.S.S.R. Report for Medium Engineering (i.e. armaments).
They too have underfulfillea the Plan. The political situation
demands this method of reporting. Do you really think that
BIRO (the then Minister for Medium Engineering) would tolerate
the Plan for armaments being underfulfilled?" The U.S.S.R.
figure for Medium Engineering during the same period was indeed
about the same as that in Hungary.
4. GENERAL
a) Public attitude to Plan Results
The ralsification of Published Plan results in the main achieves its
purpose of misleading people in Hungary, because the majority are not
accustomed_ to think at all, or else do not have sufficient knowledge of
any particular industry by which to juage the published figures. Those
who ao think keep their thoughts to t-emselves.
b) Avail1111Iy_2y Reliable Fiaures to High Officials
Because of the falsification of returns by the indiviaual concerns,
accurate figures are not available at all. But, as-uming that these
falsifications are disregarded and that the results are used only for
comparing one period with another, the Monthly Production Reports prepared
in the Statistical Sections of the Ministries would be more reliable than
the official figures published. Equally the Monthly Production Reports
at ministerial level for armaments would be of limited use for comparing
production in different periods,
c) Similarity to and Co-ordination with the U.S.S.R. and other Satellites
It is "believed that the practice of reporting Plan Results in the
U.S.S.R. and other Satellites,id,.if not identical, very similar to that
in Hungary. It is also believed that some of the falsifications are the
outcome of policies 3entra11y directed from 'Moscow, particularly of the
publishea rcsults for armaments in the former Ministry for Medium Engineering.
It is not known by what liaison agencies this co-ordination is carried out.
SECRET CONTROL
U.S. UFFICiALS DRY
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