USSR: POLICY TOWARD THE CONSUMER

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84T00926R000200070002-4
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 52
• Document Creation Date: December 22, 2016
• Document Release Date: January 26, 2012
• Sequence Number: 2
• Publication Date: December 1, 1983
• Content Type: REPORT

Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Fr i \ Intelligence
USSR: Policy
Toward the Consumer
"Ism AnasnMt
SOY 83-10212
December 1983
Copy 5 i 9
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
2bAl
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
LIICltuiatty u1 1.u1111UCKILINl
Intelligence
USSR: Policy
Toward the Consumer
This paper was prepared by ~ Office of
Soviet Analysis. Comments and queries are welcome
and may be directed to the Chief, Soviet Economy
Division, SOYA,
Confidential
SOV 83-10212
December 1983
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
USSR: Policy 25X1
Toward the Consumer F_~
Key Judgments The Andropov regime is taking a cautious approach on consumer issues.
Information available Without impinging on defense or industrial investment, it has little room
as of 30 November 1983 for maneuver until the Food Program's 1990 agenda for upgrading and
was used in this report.
integrating sectors involved in food production, processing, and marketing
pays some return and more resources can be spared for the production of
soft goods and consumer durables. Moreover, it does not view rapid
improvements in consumption as an urgent necessity. 25X1
Andropov seems willing to settle for slow growth in consumption, in part
because he believes workers can be motivated by other means. Andropov
has been careful not to raise consumer expectations. Instead, he has
downplayed the material aspects of consumption while at the same time
stressing that increases in income must be closely linked to increases in
labor productivity.
When Andropov became General Secretary, he found a consumer scene
marked by persistent shortages and formal and informal rationing. Soviet
planners thus far have stressed the macroeconomic aspect of the problem:
stemming consumer demand by holding down the growth of money
incomes. Several economic indicators, however, show that imbalance in the
form of excess purchasing power is not as significant a problem as
generally believed. The growth of incomes has slowed steadily as planners
reduced the growth of wages and transfer payments in response to slowing
growth in availability of consumer goods. But Moscow has been unable to
produce the right assortment of goods and services. Attempts to reduce the
disequilibrium have been hindered by the regime's failure (a) to adjust
relative prices, resulting in a pervasive seller's market in which prices for
goods generally do not reflect scarcity or cost and (b) to provide effective
incentives for the producing enterprise to respond to consumer desires, to
innovate, and to exercise stronger quality control.
Most notably, since the late 1970s the USSR has not been able to increase
the availability of quality foods, although some forward momentum is
developing this year. Demand has also continued to run far ahead of supply
in two other major categories of consumption-housing and personal
services. Even in the absence of substantial increases in supply, better
balance between quantities demanded and supplied in all of these markets
could be achieved if prices were higher. But, aware of the role of price in-
creases in kindling worker unrest in Poland and committed to the tradition
of low prices for basic necessities, Moscow is reluctant to raise official
Confidential
SOV 83-10212
December 1983
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
%_VillIucuuafl
prices for essential goods and services. Although a dramatic rise in demand
for some of these goods and services could force Moscow to raise prices, a
broad revision of relative prices that would ameliorate most of the existence
of demand/supply imbalances is unlikely.
The pervasive disequilibrium in markets for individual consumer goods and
services can also be attributed to the planning system's inability to provide
the mix of goods that would satisfy consumer demand at existing prices
and to the failure of quality controls at all stages. Enterprises generally
lack a strong interest in the marketing side of their operations, despite
numerous government efforts to change this attitude. The resulting side-
by-side existence of shortages and surpluses of various goods means that
consumers frequently have to purchase goods other than those most
desired.
The policy implications of this situation are not encouraging from the
leadership's perspective. Containing incomes and raising prices selectively
will help to prevent the growth of excessive purchasing power, but these
policies do little to provide incentives for workers. To reinforce incentives
would require major restructuring of relative retail prices and substantial
increases in the supply of quality foods, housing, and personal services-
generally bringing the product mix into greater conformity with demand. It
would also require greater attention to relative wages to bring individual
incomes more into line with workers' contributions to production. As past
Soviet experience shows, it is far more difficult to carry out these initiatives
than to control the growth of household incomes.
The Andropov administration is attempting to extricate itself from the
quandary in which Brezhnev found himself in his last years: having relied
increasingly upon material incentives instead of discipline, Brezhnev had
neither strong positive nor strong negative worker incentives at his disposal
in a period of much slower growth of real consumption. Recognizing that
the economy would be hard pressed to provide enough material rewards to
elicit better work performance in the near future, Andropov has taken a
number of more direct steps. These measures-especially, the discipline
campaign-probably contributed to the economy's rebound this year. The
impact of the focus on discipline is unlikely to endure, however, unless
some way of firmly and consistently tying worker remuneration to worker
performance is devised that does not depend upon continual political
pressure from the top.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
Establishing this link between pay and performance would require a
reversal of the pronounced trend toward wage leveling that occurred under
Brezhnev-an unlikely prospect in a period of serious labor shortages and
when overall wage increases are being held to historic lows by postwar
standards. Finally, even if the wage system is eventually structured so that
payment corresponds more closely to contribution to production, workers
will not be able to translate higher incomes into improved living standards
if the desired consumer goods are not available.
The Andropov regime, while trying to dampen consumer expectations,
nonetheless acts as if it believes that at least limited improvements in the
consumer's lot are necessary to stave off more serious discontent and to
provide incentives for labor. We judge that Moscow will be highly
reluctant to allow consumption levels to decline from their present level and
will continue to do what it can, given various constraints, to increase
consumption. We believe that the Soviets will continue to import substan-
tial quantities of consumer goods, in part by pressuring their CEMA
partners for more deliveries of these goods. In addition, indications have
appeared that the leadership may allocate some additional resources to the
food and light industries beyond those already planned in 1984 and 1985.
The 1984 economic plan and the discussions surrounding the compilation
of the 1986-90 Plan will provide more clear-cut evidence regarding
Andropov's intentions in the consumer arena.
The trends in consumer goods production, along with Andropov's approach
to dealing with imbalances, mean that consumption growth is likely to be
slow at best over the next several years. The reactions of the populace to
continuing consumption problems are likely to be manifested primarily in
greater apathy toward the social and political values of the system, which
could be reflected in performance at the workplace. In the current era of
resource stringencies, this would do more damage to the economy and be
more difficult for the regime to counter than an increase in sporadic civil
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
Key Judgments
Leadership Attitudes Toward the Consumer
Leadership Assessments of Specific Consumption Problems
Purchasing Power, Quality, and Product Mix
5
What Andropov Has Done
6
The Main Sources of Trouble in the Consumer Economy
7
The Three Main Trouble Spots in the Consumer Economy
8
Quality Foods
9
Repair and Personal Care Services
11
Origins of the Product-Mix and Product-Quality Problems
12
Slower Growth of Output
13
13
Planning According to Consumer Demand
14
Enterprise Incentives the Fundamental Problem
14
The Problem of Quality Control
15
16
16
17
Experiments in Planning
17
Investment Priorities
18
Consumption Levels and Popular Morale
18
1. USSR: Average Annual Percentage Growth of Real Per
Capita Consumption, 1966-82
2. USSR: Net Additions to Savings, 1965-82
vii Confidential
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
1.
USSR: Average Annual Growth of Total Personal Income and
Expenditures
2.
USSR: Marriages and New Housing
3.
USSR: Growth of Output in Consumer Goods Industries, 1966-82
13
Appendixes
A.
USSR: Trends in Savings
B.
USSR and Selected Countries: Ratios of Assets to
Consumption Outlays
25
C.
USSR: Calculations of Personal Money Incomes, Deductions, and
Personal Disposable Money Incomes, 1950-82
29
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
USSR: Policy
Toward the Consumer
Introduction
Among the most difficult challenges facing Yuriy
Andropov when he became General Secretary of the
Communist Party of the USSR was that of improving
worker performance just as the increase in real con-
sumption of the population had virtually come to a
Although the standard of living improved substantial-
ly during the Brezhnev era, it remained low in
comparison with those of the developed Western
nations and some East European countries. Further-
more, the Soviet economy is doing a poor job of
satisfying consumer expectations. Growing consumer
dissatisfaction stems in part from the marked slow-
down in the growth of consumption that is part of the
general decline in Soviet economic growth (figure 1).
But it also reflects serious imbalances between supply
and demand in certain markets, evident in long lines
at state stores, frequent resort to informal rationing,
and open acknowledgment by Soviet officials and
media that the consumer sector is in disarray.F__1
This paper will first examine the evolution of leader-
ship attitudes toward the consumer sector, with spe-
cial attention to the current regime's assessment of
the scope and implications of consumer sector prob-
lems. We will then present our own assessment of the
origins of consumer sector difficulties. Finally, the
paper will conclude with a discussion of the outlook
for consumption under Andropov.
Leadership Attitudes Toward the Consumer
Leadership views on consumer welfare were trans-
formed after the Stalin era, which gave popular sea
welfare a low priority and which mobilized vast
amounts of unpaid and involuntary labor in the drive
for industrialization. The change that has occurred in
perception of the importance of the consumer sector,
however, has been accompanied by differing empha-
ses and nuances in each regime, and the Andropov
regime is developing its own assessment of why and to
what extent consumer satisfaction matters.
Figure 1
USSR: Average Annual Percentage Growth of
Real Per Capita Consumption, 1966-82
Percent
6
Khrushchev and Brezhnev. Khrushchev realized that a
well-developed consumption sector is a basic feature
of industrialized societies, and that the Soviet Union,
as a model for developing countries of the socialist
alternative to capitalism, could not postpone attention
to consumer goods and services indefinitely. The
belief that rapid growth in consumption would vali-
date the Socialist system and confer international
prestige dominated the party program adopted in
1961, which forecast that the Soviet Union would
surpass the United States in industrial production by
1970, provide the Soviet people with the highest
standard of living in the world by 1980, and complete
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
t-onnaennai
the transition to Communism that same year. Con-
sumer policy during the Khrushchev years was aimed
at expanding social benefits; the provision of highly
subsidized housing, public transportation, health care,
social security payments, and education grew rapidly.
Khrushchev's proconsumer stance was motivated by
domestic considerations as well as by the desire to
project an image of success abroad. Converting the
forced labor system to one of normal industrial and
scientific employment made it necessary to build
housing, pay realistic wages, and ensure a more
adequate supply of foodstuffs, clothing, and recre-
ational facilities. In addition, according to Ray and
Zhores Medvedev, the Soviet leader's intense interest
in agriculture arose from his realization that an urban
food supply crisis of historic magnitude was impend-
ing as a result of rapid postwar urban growth and the
long-term severe neglect of the farm sector. Substan-
tial support for agriculture has been a basic feature of
Soviet domestic policy ever since Khrushchev's recog-
nition that improving farm performance was essential
not only to maintain social peace but also to boost the
standard of living to levels commensurate with West-
ern industrialized countries.
During the Brezhnev regime, the role of consumption
growth came to be viewed in more pragmatically
domestic terms: rapid and steady growth of consump-
tion would not only foster popular commitment to the
system but would also spur productivity growth
through greater worker effort. In the early 1970s the
regime began to stress the tie between the "well-being
of the worker" and "rapid production growth." Brezh-
nev emphasized the need to increase the output of
consumer goods and substantially increased the share
of investment devoted to agriculture. Rapid increases
in incomes were planned to provide the population
with the disposable income with which to buy more of
the goods-especially meat and automobiles-the
consumer craved. In the waning years of the Brezhnev
era, as growth in both labor productivity and con-
sumption steadily declined, the leadership persistently
stressed the link between consumer welfare and pro-
ductivity. The word "mood" became more common in
the leadership's vocabulary as concern mounted over a
possible escalation of consumer dissatisfaction into
unrest caused by unmet expectations.
Although it gave considerable weight to the effort to
motivate workers by providing a better life, the
Brezhnev regime also believed that planning and
management was a major determinant of labor pro-
ductivity. Beginning in 1965 the regime launched a
series of reforms designed to improve both labor and
capital productivity. By 1979 the regime was express-
ing extreme frustration with the operation of the
planning and management system. Indeed, as the
economy failed to respond as expected to the numer-
ous adjustments and "reforms," Brezhnev came to see
that promoting unrealistic consumer expectations
might be just as dangerous to social order and
productivity growth as would be the failure to provide
sizable improvements in consumption levels.
Accordingly, the leadership began in late 1979 to seek
ways of restricting consumer demand. For example, in
a 1979 issue of Kommunist, then Gosbank Chairman
Alkhimov recommended several ways of increasing
the output of consumer goods but devoted the major
portion of the article to methods of dampening de-
mand. These included the limitation of "unjustified"
increases in wages-that is, increases not tied to labor
productivity-and strengthened control by central
administrative organs and banks over wage payments.
The reform measures adopted in 1979 emphasized the
necessity of tying wages more closely to individual
productivity. Although little was done to implement
the measures, they represented a policy shift from the
egalitarian wage policy of the past. Price increases on
a range of selected nonfood items occurred in 1979
and 1981 as the regime sought to reduce demand
pressures by limiting the growth of purchasing power.
The 11th (1981-85) Five-Year Plan directives set out
the lowest rates of wage growth of the Brezhnev era.
By the end of its tenure, the regime, perhaps as part of
its efforts to temper expectations, became more dis-
posed to admit publicly its concerns over consumer
problems. However, it also pinned some of the blame
upon poor worker performance. "Whoever wants to
live better must work more and better," Brezhnev
warned the population at the 26th Party Congress in
early 1981.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
The Polish crisis-coming the year after a particular-
ly disappointing performance in agriculture and a
sharp worsening in the supply-demand gap for quality
foods-worried the leadership, especially some re-
gional party leaders who had to contend with social
tensions generated by ethnic and cultural factors in
addition to consumer dissatisfaction. But whatever the
extent of the leadership's fear that the Polish example
would trigger a similar response in the USSR, it
clearly was not sufficient to cause a shift in resources
toward the consumer. The Soviet Union was in the
midst of a downward drift in economic growth that
tended to force greater attention to investment in
priority sectors like energy, transportation, and heavy
Neither the plan for 1981 nor the 11th Five-Year
Plan, both released in the fall of 1980, contained
measures designed to bring about a rapid and sus-
tained improvement in welfare. Over the next year, a
package of coping strategies emerged from the leader-
ship's ongoing assessment of the Polish situation. The
prescription was: continued but not rapid consumption
growth (which might have led to serious conflict over
resource allocations); a focus on the worst problem,
the diet-hence the promise for a "Food Program";
greater attention to the priority allocation of the most
desired goods to workers in large industrial installa-
tions; and an escalation of rhetoric about the role of
trade unions in protecting worker interests.
Andropov's Outlook. Andropov's statements show
considerable continuity with the Brezhnev regime's
assessment of the role of consumption, but Andropov
may well believe that his predecessor during most of
his tenure had overemphasized the link between con-
sumption and productivity. While aware that the level
of consumption affects labor incentives, Andropov
believes that worker morale is also determined by
several other factors. One of the most significant is
the individual's commitment to the Soviet system and
its goals. Like Brezhnev, Andropov wishes to raise
consumer satisfaction but knows that only a slow
advance in consumption growth can be sustained
under present circumstances. Other methods there-
fore must be found to motivate workers
With the Polish situation under better control, Andro-
pov probably feels in a better position to move ahead
along the path which Brezhnev had taken only shortly
Countering Trouble in Estonia
A recent article in the authoritative party journal
Kommunist by Estonian party first secretary Karl
Vaino explicitly linked the influence of Solidarity
with threatened strikes in the Baltic republic in the
fall and winter of 1981. Estonian party officials, by
their own account, took seriously the possibility of
strikes or other spillover from Poland.
Nevertheless, Vaino's description of the Estonian
leadership's response indicates that even in this re-
public, whose population is probably the most aware
of all Soviet groups of differences between Western 25X1
consumption levels and their own, the leaders did not
focus upon consumption issues.
When leaflets were circulated calling for a one-hour 25X1
general strike, the efforts to counteract the potential
for unrest centered on ideological and propaganda
efforts, according to Vaino's account. And this ap-
proach, Vaino says (echoing Andropov s own recent
prescription for addressing the ills of Soviet society)
is the remedyfor thefuture. "Let us reemphasize that
practical experience indicates that ideological work
must be specific, substantial, militant, and aggres-
sive. In exposing the antihuman nature of the capital-
ist system, we must steadily promote in people's
minds the values of socialism and develop ideological
firmness, class responsiveness, and the ability to
critically react to bourgeois propaganda and to op-
pose it firmly, " he says. 25X1
before the eruption in Poland. In his public addresses,
Andropov has been more critical of flagging economic
performance than was Brezhnev, and-far more
strongly than Brezhnev-he has blamed this upon
labor. In his speech at the November 1982 plenum,
for example, Andropov sounded the theme of disci-
pline (while echoing Brezhnev's pronouncement in
1981): "At present, it is particularly important and
necessary that each worker understand that the im-
plementation of the plan depends on his labor contri-
bution and that everyone understand well the simple
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
truth that the better we work the better we will live."
In his speech to the workers of a Moscow factory in
late January, he stated, "Although not everything can
be traced back to discipline, it is necessary, comrades,
to begin with it.... There are no miracles. You
yourselves understand the State can only provide as
many goods as are produced."
In his party plenum speech this June, Andropov took a
carefully balanced approach to consumption issues.
He devoted more attention to consumption-the food
supply, housing, and provision of health services-
than in any of his previous speeches, stating that "the
ultimate objective of our economic efforts is to im-
prove the living conditions of the people." But he
downplayed the role of the materialistic aspects of
consumption in the general quality of life, stressing
instead the necessity of improving the moral climate
of Soviet society:
The slogan "Raising the Standard of Living" is
used often in our country. But it is sometimes
interpreted in a simplified way, meaning only the
growth of the incomes of the population and the
production of consumer goods. In fact, the concept
of living standards is much wider and richer. It
encompasses a steady growth in the consciousness
and cultural life of the people, including their
cultural standards in everyday life and conduct,
and what, I would call, reasonable consumption.
Also encompassed in this concept is exemplary
public order, health, a rational diet, a high quality
of public service (with which, as is known, far from
all is well in our country). It also encompasses a
moral and aesthetic use of free time. In short,
everything which is civilized in line with socialist
principles.
When discussing faster growth in labor productivity,
which he called "the key task in the economic
sphere," the solutions he cited included improving
labor discipline, upgrading science and technology,
and dealing with the disorders in the planning and
management system.
In his speeches since taking power, Andropov has
been careful not to promise more than the eventual
fulfillment of "reasonable" consumption levels.' His
reluctance to raise consumer expectations probably
partly underlies his call for a new party program to
replace the party program of 1961, which expressed
Khrushchev's dream of showering the country with
consumer goods. Instead, Andropov has emphasized
the role of discipline in promoting work effort. Al-
though initially the concept of worker discipline was
applied to blue-collar workers and directed largely at
absenteeism, drinking on the job, and high turnover,
Andropov has extended it to society at large, and the
concept of discipline now implies social order and
popular commitment to the system. It is the antithesis
of what a recent Pravda editorial condemned:
Unfortunately, people who live in their own little
world of exclusive petty concerns, pushing commu-
nity interests into the background, are still very
much with us. This can be seen in manifestations
of a private-ownership, nationalistic mentality;
local self-interest; parasitism; money grubbing;
acquisitiveness; drunkenness; and so on. An indif-
ferent, narrowminded attitude toward life is in-
compatible with the makeup of a conscientious
Soviet citizen.
Although Brezhnev spoke frequently of the need to tie
wage growth more closely to individual output, efforts
in this direction were halfhearted and hampered by
various systemic constraints. To offset purchasing-
power growth, the regime pursued a policy of selective
' The concept "rational norms of consumption" has long been an
aspect of Soviet planning. It refers to "recommended" standards of
consumption of certain goods in physical units. For example, the
"need" for bread was set at 120.4 kilograms per capita in 1970, and
the need for men's coats in the wardrobe was set at 2.6 in 1961.
There is little evidence that the consumption norms have played an
active part in short- or medium-range planning; they have often
been calculated on the basis of production potential rather than
consumer demand, and are thus generally an outcome of the
planning process rather than an input. Thus, they have often been
used to brake consumer expectations. Upon occasion when the
norms have proved to be beyond the capacity of the economy, they
have been revised downward. For example, lower norms for meat
and milk consumption appeared last fall.)
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
price increases and continually increased the level of
consumer goods imports. The Andropov regime has
harshly attacked wage leveling and is making a
stronger effort to link remuneration to the contribu-
tion of each worker. The most recent step in this
direction was a decree in August calling for tougher
measures against absentees, drunks, and other offend-
ers. It provides for loss of pay and vacation privileges,
demotion, or even dismissal for those guilty of such
offenses while offering positive incentives for good
workers. Managers are liable for disciplinary proceed-
ings for failing to ensure labor discipline. These
measures, while tougher than any taken under Brezh-
nev, are not likely to take hold over the long term
because of the tight Soviet labor market.' Nor do they
systematically link pay to output. The latter problem
was noted in a recent Politburo meeting: a Pravda
summary of the meeting's conclusions stated that "an
economically based correlation between labor produc-
tivity and wages has not been fully ensured."
Andropov has indicated that he will continue to push
for more wage differentiation. A thoroughgoing and
time-consuming revision of wage norms to reward
higher skill levels would be necessary to carry out
Andropov's intention of paying better workers more,
but even this would not be sufficient. Labor productiv-
ity growth is hampered by several problems outside
the individual worker's control, such as late deliveries
of supplies, equipment breakdowns, and faulty techni-
cal specifications. As it is, workers receive only half
their wages when they are standing idle through no
fault of their own, a situation which contributes to
poor morale and falsification of output statistics by
managers unwilling to antagonize their workers.F_
Leadership Assessments of
Specific Consumption Problems
Considerable continuity also exists between the
Brezhnev and Andropov regimes in their assessment
of which problems are the most significant, even
though some shifts in emphasis have occurred.F_
Purchasing Power, Quality, and Product Mix. Andro-
pov has said more than once that the consumer
economy is plagued by excessive purchasing power.
He appears convinced that, because of the unexpected
falloff in industrial and agricultural growth, the over-
all level of spending power is too high in relation to
the availablity of goods and services. Brezhnev appar-
ently believed that, if this problem was not acute, it
was on the threshhold of becoming so. Targets for
wage growth were consistently and steadily reduced
during his regime in response to the slowing growth in
output of consumer goods and services.
Both regimes have identified the lack of quality 25X1
control in consumer products as a significant cause of
consumer dissatisfaction. The Brezhnev regime insti-
tuted a set of measures to upgrade standards in
response to the recognition that, although some mar-
kets were supplied with enough goods, such as shoes,
consumers were not buying them because of poor 25X1
quality, causing runups in inventories. Both leaders
recognized that little progress has been made. Andro-
pov, for example, remarked at the June plenum:
It is not enough to improve the system of monetary
remuneration for work; we must also produce the
necessary amounts of goods that are in demand.
The highest standards of quality should be set,
with no exceptions. But the situation today is
sometimes downright vexing; the initial materials
are good, but the final product is such that people
prefer to overpay speculatorsfor well-made, taste-
ful articles. This situation must be corrected, and 25X1
corrected without delay.
If Andropov is vexed by quality problems, he is
displaying an even higher level of frustration and
irritation over the mix of consumer products. Brezh-
nev too complained rancorously on one occasion about
deficiencies in product assortment. At the fall 1979
Central Committee plenum, he singled out certain
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
ministers by name in an effort (largely fruitless) to
reduce shortages:
Of late, the CPSU Central Committee and the
newspapers have received letters and complaints
on interruption in the supply of goods, which for
some reason are described as 'petty' -the sim-
plest types of medicines, soap, detergents, tooth-
brushes, toothpaste, needles, thread, diapers, and
other light-industry goods. This, comrades, is
unforgiveable. The blame falls on the ministries
producing such goods, the Ministry of Light Indus-
try, Minister Comrade N. N. Tarasov. Another
culprit is the Ministry of Trade, Minister Com-
rade A. I. Struyev. The trade network has the
direct obligation to influence far more energetical-
ly the production process and demand from indus-
try commodities truly needed by the consumer,
and then to better manage their distribution. The
situation must be corrected as early as 1980. The
specific culprits for each "shortage" must be found
if caused by negligence, irresponsibility, or bun-
gling. They must be punished [shouts: "Correct!"
applauseJ.
What Andropov Has Done. Since early this year,
several decrees relating to consumer goods and serv-
ices have appeared; their general tone indicates high-
level frustration and irritation that the variety, quali-
ty, and general availability of consumer goods and
services are not improving because many enterprises,
through selective juggling of success indicators, man-
age to evade their output targets for consumer goods.'
This is possible because the production of most dura-
bles and household goods is the responsibility of
heavy-industry enterprises and, being manufactured
across a broad range of factories, is a sideline for most
of these enterprises. Thus, factory managers generally
fail to meet their consumer goods goals, concentrating
efforts on their main products to meet their primary
plan targets.
A decree issued in May sharply criticized ministries
and local party organizations for failing to ensure that
enterprises within their purview meet consumer goods
plans and stated that the Central Committee and the
Council of Ministers had "warned" and "demanded"
that they "completely fulfill" their plans for consumer
goods. The decree is aimed at increasing pressure on
ministries and local party organizations and Soviets to
oversee the work of local factories and service organi-
zations, a tactic taken in the past but not generally as
vehemently. This decree follows the introduction sev-
eral months ago of a new success indicator that tasks
heavy-industry enterprises to produce a specified
amount of consumer goods output per ruble of the
enterprise's wage fund. But because enterprises are
still obliged to meet their primary output targets, the
decree is not likely to provide a significant stimulus to
the production of consumer goods output-hence the
pressure tactics employed in the May decree.
Andropov has demonstrated his uneasiness over the
shortages of quality foods by retaining the priority
accorded to the Brezhnev Food Program, launched in
May 1982 to improve the production, processing, and
marketing of food products. Judging by Soviet press
reporting on Politburo meetings, the leadership under
Andropov has devoted more time to agriculture than
any other domestic issue and has taken several steps
to help the implementaton of the Food Program.'
However, the Andropov commitment to the Food
Program apparently does not include a rapid expan-
sion in quality foods availability such as Brezhnev
envisioned when he announced the Program. The
decision of the Andropov regime not to accelerate
grain imports (to feed herds) in the 1982/83 market-
ing year 5-despite an improved financial situation,
lower world market grain prices, and low animal
weights-may reflect Andropov's cautious approach
to raising consumer expectations as well as some
improvements in domestic feed and forage production.
Andropov likely is reluctant to press for stepped-up
' But Andropov, through his powerful party secretary for agricul-
ture, Mikhail Gorbachev, is shaping the implementation of the
Food Program in a manner that reflects his own preoccupation with 25X1
the problem of better tying individual wages to output. They have
actively promoted the collective contract system-an aspect of the
Food Program that received relatively little attention before Brezh-
nev's death. In this system, which has been used experimentally at
least since the 1960s, farm workers are rewarded according to the
size of the harvest rather than receiving hourly or piecework rates.
' Total grain imports in the 1982/83 marketing year were 35
million metric tons, 11 million tons less than in the 1981/ 82
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
Table I Percentage increase Figure 2
USSR: Average Annual Growth in current prices USSR: Net Additions to Savings, 1965-82
of Total Personal Income and
Expenditures
Personal Disposable Consumer
Money Income a Outlays for Goods
and Services b
1981 3.9 5.4
3.9
a Calculated from appendix C, table 3, column 3.
b Calculated from Soviet reported retail trade less estimated sales to
institutions and-to avoid double counting-some services, plus our
estimates of household outlays on housing, utilities, communica-
tions, transport, repair and personal care, recreation and culture,
health, and education. Information on privately earned income,
with the exception of net incomes of households from farm
products, is too sparse to permit estimates; therefore household
outlays on consumption are adjusted to exclude expenditures for
privately provided goods and services except for net incomes of
households from farm products. Our estimates in ruble terms of
disposable incomes less savings do not match estimates of consumer
spending in ruble terms because of the absence of data on such
incomes as prisoner's wages, various kinds of payments not included
in the regular wage fund, receipts from sale of property and from
private nonagricultural activities, and others.
Preliminary.
production of livestock products in 1983 and 1984
that cannot be guaranteed in subsequent years and
probably prefers more gradual, but steady, progress.
The Main Sources of Trouble in the Consumer
Economy
We believe that the imbalances in the Soviet consum-
er goods market to be less the consequence of excess
purchasing power than the result of imbalances in
supply and demand for specific categories of goods
and services or items greatly desired by consumers:
? Estimates of personal money income and expendi-
tures over the last decade and a half show generally
the same rates of growth (table 1). In recent years,
moreover, the rise in consumer expenditures-in
part due to selective increases in retail prices-has
outstripped the growth of money income.
? The part of disposable income (what is left to spend
after taxes and other largely obligatory deductions
are netted out) that Soviet households have been
saving has represented a decreasing share of annual
increments in their incomes, and average savings
rates are below those of most Western industrialized
and some East European countries (figure 2 and 25X1
appendix A).
? Comparisons of the USSR with selected Western
and East European countries suggest that the ratio
of net financial assets to consumption outlays in the
USSR is not disproportionately high (appendix B).
Because of systemic shortcomings in the adjustment
processes of the Soviet economy, particularly with
respect to making the product mix and relative prices
consistent with consumer demand, imbalances be-
tween supply and demand for individual products or
25X1
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
groups of products may persist-even though in terms
of aggregate income and aggregate availability of
goods the problem does not appear to be primarily one
of too many rubles chasing too few goods. Consumers,
for example, are frustrated more by their inability to
purchase quality foods, stylish clothing, and automo-
biles than by the overall mismatch between purchas-
ing power and the supply of goods and services.
Soviet expenditure levels often mask the degree of
consumer dissatisfaction as Soviet consumers fre-
quently have to buy less desirable substitutes to
satisfy a basic need or demand.' More starchy staples
are consumed because not enough livestock products
are available; families that cannot obtain a separate
apartment settle for communal housing; a shopper
who cannot find cotton goods will instead purchase
synthetic cloth. Finally, when consumers will not
purchase low-quality products or services in state
retail establishments or cannot find a close substitute
for the item desired, private or illegal markets (at
higher prices) serve as outlets for purchasing power.
These alternative markets increase the net availability
of consumer goods and services and thus provide an
antidote to some of the imbalances in state markets.
The Soviet leadership must therefore contend with the
negative impact on labor productivity of the frustra-
tions engendered by imbalances in consumer markets.
Suggestions that wages and bonuses have lost their
incentive value overstate the case, but the chronic
shortages of some highly desired goods and services,
as well as serious problems in product mix and
quality, have contributed to lackluster performance
by Soviet workers. The typical Soviet citizen must still
work to live, but harder work is not likely to lead to a
proportionate gain in well-being when the desired
better quality goods are not available.
6 Some categories of consumer goods and services are in short
supply (demand is greater than the available supply at the existing
price) because, in the eyes of Soviet consumers, there are no close
substitutes. A test of substitutability is the willingness of the
population to forgo consumption of a particular commodity when its
price rises relative to that of another commodity. Small price
increases for goods that have close substitutes can eliminate excess
demand. But for goods having a unique attraction for consumers-
passenger cars and housing, for example-Soviet planners would
have to raise the prices substantially to eliminate the excess
Reinforcing worker incentives requires major restruc-
turing of relative retail prices and substantial in-
creases in the supply of quality foods, housing, and
personal services-generally bringing the product mix
into greater conformity with demand. It would also
require greater attention to relative wages to bring
individual incomes more into line with workers' con-
tributions to production. Accomplishing the former
would prove extremely costly in terms of the adverse
impact on defense and heavy industry; the latter
objective would require a reversal of the pronounced
trend toward wage leveling that occurred under Khru-
shchev and Brezhnev.
The Three Main Trouble Spots
in the Consumer Economy
Shortages persist especially in three sectors of the
consumer economy: quality foods, housing, and every-
day services. The quality of the diet is the Soviet
citizen's leading barometer of his standard of living;
food accounts for the largest share of his family's
budget, and shortages must be coped with on a daily
basis. The housing shortage-which has resulted in
the widespread practice of multiple households shar-
ing one housing unit-produces the constant stress 25X1
associated with overcrowding and lack of privacy.
Meanwhile, the general unavailability of personal
services compounds the frustrations of daily life,
especially for the working woman.
Quality Foods. Soviet citizens receive enough calories,
but the diet is inferior to that of developed Western
nations and some East European countries in terms of
nutritional quality and variety. The per capita avail-
ability of meat and meat products has remained at the
1975 level, that of milk and milk products has fallen
by 7 percent since 1975, and per capita availability of
fruit has increased by only 2 percent. As a result of
stagnating output of these quality foods and the
maintenance of state retail prices at levels that are
low in relation to both production costs and rising
money incomes, long queues and informal rationing
have become widespread. In late summer 1981, the
authorities invoked a mild form of rationing limiting
the purchases of certain foods by state store custom-
ers.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
(ontidential
The Second Economy-Inconspicuous
Consumption on a Large Scale
Private economic activity, although severely restrict-
ed under Soviet law, is nevertheless widespread in the
USSR. Private agriculture is the only 'for profit"
activity of any significance that is encouraged.F-
Most second economy activity probably has not in-
creased at a faster pace than has the overall growth
of real income. But in at least one part of the
consumer economy-the market for meat and meat
products-the growing gap between supply and de-
mand appears to have caused a considerable upsurge
in illegal trade. Clerks in state stores (with the
connivance of store managers) set aside meat for
themselves, friends, and others under special arrange-
ments and sell the meat at prices two to four times
the retail level. Although the Brezhnev regime proba-
bly realized that such practices were more the result
than the cause of shortages, it worried about the
resentment generated by the general unavailability of
meat. A decree issued in the fall of 1981 provided
stiffer penalties for store personnel and for the first
time applied penalties to customers engaging in brib-
ery.
The case of meat shows why black markets develop
and flourish. Official retail prices for many goods are
set too low in relation to supply and demand; as
supplies fluctuate, illegal markets expand or contract
in rapid reaction. Meat in state stores, of course, is
owned by the state; theft of such goods offends few
consciences. Theft of socialist property is extremely
common, on the premise that what is "ours" is also
"mine. " Finally, salaries for retail personnel are low
in relation to salaries in most sectors; the temptation
to supplement them is strong.
The excess demand of the population for quality foods
is reflected in prices at collective farm markets
(CFMs), where individuals sell the surplus from their
private plots and where prices vary according to
supply and demand. Prices paid in CFMs are on
average more than double the state retail prices. Part
of the price difference reflects the superior quality of
the products sold in CFMs. But even assuming that
Because it often cannot be completely concealed,
illegal trade, production, and the provision of services
generate a great deal of bribery of the relevant
officialdom: auditors, inspectors, supply officials in 25X1
the planning offices, managers and workers in the
'first economy" (to shunt materials or to produce
goods for underground enterprises); the economic
police and the regular police; and authorities in the
party and state bureaucracies (to ignore transgres-
sions). Should the law descend upon illegal opera-
tions, a common reaction is to try to buy off the
procuracy and the courts to avoid or lighten a
The various Soviet regimes have tolerated illegal
private activity in varying degrees, probably realizing
that to some extent it provides goods and services
which the state cannot offer and that it serves as an
outlet for energies and frustrations that otherwise
might be channeled into more threatening political
activity. The aspect of the illegal economy that
appears to bother Andropov most is the resulting
corruption of government and party officials that in
turn fosters resentment among the populace towards
the system. He is currently conducting a "house-
cleaning" among party and government officials. But
as long as serious shortages of many goods and
services remain, the scope of private activity is not
likely to lessen.
quality differences might account for as much as half
of the price differential, supply-demand imbalances
have put considerable upward pressure on free market
prices.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
k.onnaemiai
Assessing Excess Demand for Livestock Products
Excess demand in some consumption categories can
be estimated roughly. If the plans for output of
livestock products had been met in 1980, Soviet
citizens would have consumed about 65 kilograms
(kg) of meat per year instead of 58 and about 338 kg
of milk and milk products instead of 314. If the
additional 7 kg of meat per capita and the additional
24 kg of milk per capita had been available for
purchase through the state retail trade network,
consumers would have spent an additional 3.7 billion
rubles-about 1 percent of household outlays in
1980.a Another way of estimating excess purchasing
power for livestock products is to calculate, again
assuming an income elasticity of one, b what the
additional expenditures for meat and milk products
would have been in 1980 (because of the rise in
incomes since 1975) if supplies had been available;
this calculation yields a figure of 4 billion rubles,
close to the alternative estimate.
To absorb purchasing power, the regime could raise
state retail prices on livestock products. For example,
increasing average retail prices on these products by
only 15 percent (assuming no change in volume sold)
could have increased household outlays by 4 billion
rubles. But, mindful of the role of food price in-
creases in kindling worker unrest in Poland and of
the unrest aroused in the Soviet Union after the last
major food price hikes in 1962, Moscow appears
willing to tolerate repressed inflation rather than risk
the consequences of official price increases.
a Based on average state retail prices for meat and milk. The cost
of an equivalent physical amount of starchy staples is netted out
from the total additional expenditures for meat and milk, assum-
ing a rough equivalency in a calorie substitution.
b The evidence suggests an income elasticity of demand for
livestock products of at least one. (If elasticity were exactly one,
consumers would increase spending on livestock products in exact
proportion to increases in income. If it were greater than one,
spending on livestock products would be rising at a faster rate than
Instead of raising prices openly, Moscow probably will
continue to pass off marginally improved existing
products as being new products deserving higher
prices. An ideal vehicle for justifying price changes in
food products is the addition of packaging. According
to the Food Program agenda, the prepackaging of
basic foodstuffs is to increase substantially by 1990.
Another avenue for raising prices is the substitution of
higher for lower grade products, but-like simulated
product improvement-its effects are difficult to
measure. For example, the lowest priced category of
bread appears to be often unavailable, although high-
er priced types are regularly stocked.' While nudging
up food prices in a concealed and unofficial manner,
Moscow has officially raised the price of alcoholic
beverages and tobacco products several times in re-
cent years and will likely do so again to soak up more
rubles. These are considered "nonessential goods" by
planners but not by the populace-price increases
have not yet had much effect on alcohol and tobacco
consumption.
The 1981-85 Plan implies that per capita consumption
of livestock products in 1985 will be roughly at the
level originally planned for 1980. While consumption
gains are being deferred, incomes will continue to rise,
further aggravating the disequilibrium in the quality-
foods market. Without imports, the situation could be
much worse. The direct importation of livestock prod-
ucts (meat and dairy products) together with the value
of livestock products obtained from imported feed-
stuffs (principally grain and oilseeds) accounted for
roughly one-fifth of the supply of livestock products in
1982. Imports of foodstuffs in general represented
about 14 percent of retail food sales in 1981.8
Because of a number of factors (notably a much better
1983 harvest of grain and forage crops), some forward
momentum in the livestock program is building this
year. But unless the government chooses to reduce
consumer demand for livestock products through price
increases, informal rationing of these products will
probably continue. Andropov has endorsed the Brezh-
nev Food Program, which provides for increased
subsidies rather than higher retail prices to meet
rising farm production costs and to stimulate in-
creases in farm output.
do not reflect differences in their production costs.
8 Imports of foodstuffs given in trade rubles were revalued in
domestic retail prices using conversion coefficients from a variety of
25X1
25X1
25X1 ?
25X1
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
Housing. Substantial unsatisfied demand for more
and better quality housing exists throughout the
country. Housing construction peaked in 1959, when
2.7 million dwellings were built. Since then, construc-
tion has gradually declined to about 2 million annual-
ly. The USSR has not attained its goal of matching
housing units with households and is not likely to do
so until at least the end of the decade.
Currently, about 20 percent of the urban population
still lives either communally, with unrelated families
and singles sharing housing, or in crowded factory
dormitories. In rural areas, conditions are worse.
Most urban housing comes equipped with electricity,
indoor plumbing, hot water, gas, and central heating;
but in rural areas the typical, privately owned one-
story wooden home lacks indoor plumbing and central
heating, although it now has electricity. According to
published Soviet statistics for 1980, for example, only
38 percent of state-owned rural housing units in the
Russian Republic were connected to central water
supply systems, and 22 percent to sewer lines; 26
percent had central heating. In both urban and rural
areas, the quality of new construction in general is
shoddy; for example, only roughly 40 percent of
housing turned over for occupation in the Russian
Republic each year is rated "satisfactory" or better.
The number of housing units in relation to households
is the best available measure of a housing surplus or
deficit. Since such information is not published in the
USSR, we employ a comparison of yearly marriages
and the number of housing units built as an indicator
of housing needs.' New households formed through
marriages each year are outpacing the number of
housing units built (see table 2). During 1975-80, for
example, the number of marriages exceeded the num-
ber of new units added to the housing stock by
4 million. Most newlyweds must live with their
families, and the waiting period for a new apartment
may be as long as a decade.
Growth in the housing stock has also run far behind
growth in per capita income, thereby increasing the
' This measure is not as accurate as that of housing units in relation
to households, because the number of households lost by death, the
number of new singles, and the number of dwelling units retired or
Table 2 Thousand units
USSR: Marriages and New Housing
Marriages
New Housing Implied
Deficit
1975
2,723
2,228 495
1976
2,594
2,113 481
1977
2,771
2,111 660
1978
2,796
2,080 716
-
1979
2,871
----------
1,933 938
1980
2,735
2,050 685
1975-80
16,490
12,515 3,975
unsatisfied demand for housing. The state subsidizes
housing rents to the tune of 7 billion rubles a year,
equivalent to slightly more than 2 percent of house-
hold outlays on goods and services in 1980. If the
authorities conclude that housing rents must be raised
to cut demand, additional purchasing power could be
absorbed, although the rates of increase would be
steeper than in the case of livestock products. For
example, to absorb 1 billion rubles, rents would have
to increase by more than 25 percent. As with food 25X1
products, the regime appears reluctant to raise basic
rents, although a number of Soviet economists recent-
ly have advocated such a step. The regime may
instead settle for raising rates associated with rents,
such as charges for utilities and floorspace allotments
beyond minimum norms. 25X1
At the party plenum this June, Andropov admitted
that "the housing problem remains acute for many,"
and stated that the problem would be solved "in the
near future"; nevertheless, he gave no indication that
construction targets would be raised.
Repair and Personal Care Services. Repair and per-
sonal care services expanded in the late 1960s at an
average annual rate of 8.4 percent; by 1981 growth
had slowed to 4.7 percent. An important reason for
the falloff in growth rates for consumer-oriented
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
l,oniiuenuu,
services is the traditional reluctance of the govern-
ment to allocate investment to them. A recent survey
in several cities, for example, showed that ordinary
housing maintenance was running one to two years
behind scheduled norms. The problem of insufficient
quantity of services is compounded by low quality.
Because personal care and repair work has a low
social status and is poorly paid, service is often
rendered in a surly and careless manner. Finally,
some evidence has appeared that state enterprises are
preempting a growing share of these services, squeez-
ing out the individual consumer. Complaints in the
press about the nonavailability and poor quality of
these services remain common. Growth in this labor-
intensive area is likely to continue to slow as the full
impact of the labor shortage is felt by the mid-1980s.
The following Soviet statistics suggest the scope of the
problem:
? State facilities are sufficient to handle only
38 percent of cars in need of repair. Only about half
of the demand for motorcycle spare parts is being
met.
? In the RSFSR, there are at any given time 7,500 to
10,500 people, who, because of difficulties in obtain-
ing spare parts, have waited for over a month for
warranty repairs on their refrigerators. Because of
various provisions in the rules for exchanging defec-
tive parts, manufacturers refuse to exchange sub-
standard or out-of-order items for new ones.
? A survey in Leningrad found that only 13 percent of
the households polled used state laundries; the
reasons given for avoiding them were the poor
quality of the washing, long waiting time for return
of laundry, and long distances from home. Through-
out the country, the number of commercial laun-
dries per capita is only about 3.5 percent of the
planning norm in cities, and even less in the
countryside.
? Roughly half of the need for eyeglasses is being met.
Lifting restrictions on private enterprise in personal
care and repair would increase the availability of
these services. Some prominent Soviet economists
want to encourage small private shops and family
businesses along the lines of East European experi-
ence. Anecdotal evidence from the open literature
suggests that many individuals are already practicing
trades or professions permitted under present Soviet
laws governing private activity. Private activity might
be encouraged by modifying the progressive taxes
levied upon most types of privately earned income,
providing working space for shops, and easing the ban
on hiring labor. Permitting private hiring of labor
would probably be the most ideologically unpalatable 25X1
course-and indeed would most disrupt current em-
ployment patterns.
There is no indication, however, that Moscow is yet
willing to go any further in promoting private activity
than the decree of January 1981 encouraging private
agriculture. Very likely this unwillingness is due
partly to the longstanding fear that labor would be
directed out of the socialized economy, a fear that
mounting labor shortages have probably accentuated.
Indeed, in an article last February in the party's
ideological journal Kommunist Andropov seemed to
rule out the expansion of any type of private owner-
ship or enterprise. Instead, the new regime has issued
several decrees requiring improvements in the delivery
of state-provided services within the scope of present
plans, including one which calls for the siting of
various service facilities (such as hairdressers, repair
shops, and laundries) at factories and other work-
places.
Origins of the Product-Mix and
Product-Quality Problems
The reasons for the pronounced disequilibrium in
markets for individual consumer goods and services
can be traced to the slower growth in output and flaws
in planning and managerial incentives. Distribution
problems further widen the gap between supply and
demand. Although-as noted earlier-Soviet plan-
ners could relieve much of the disequilibrium by a
thoroughgoing readjustment of relative prices, such
an approach is contrary to the Soviet social policy of
stable retail prices for basic consumption items. C
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
Table 3
USSR: Growth of Output in Consumer Goods Industries, 1966-82
1966-70
1971-75
1976-80
1979
Food processing
5.9
3.9
1.1
3.1
6.2
7.3
-0.8
0.5
4.0
0.5
1.9
3.6
-4.3
-5.7
8.6
1.8
10.1
2.6
1.8
Textiles
4.8
2.8
1.7
0.0
Sewn goods
12.2
3.5
4.5
4.2
0.7
-0.6
Source. An Index of Industrial Production in the
USSR,. An Index of
Agricultural Production in the USSR, US Congress, Joint Eco-
nomic Committee, Washington, US Government Printing office,
1982. Growth rates for 1980-82 were estimated using the same
methodology used in these studies to obtain growth rates for the
period 1950-79.
25X1
25X1
Slower Growth of Output. Growth of output in con-
sumer goods industries has been declining (table 3).
The deceleration in light industry was especially
abrupt in the early 1970s, and that of the food
industry, in the late 1970s. The output of canned
foods, for example, has increased by less than
3 percent since 1979; that of cotton fabric by 2
percent. Problems in deliveries of raw materials be-
cause of fluctuations in agricultural output have
caused some of the difficulties; another major factor
has been the low investment priority accorded to these
industries. Capital investment in the food industry
grew at less than half and in light industry at about
two-thirds the rate of investment growth in industry
as a whole in 1971-80. Machinery in the textile and
food processing branches has the lowest retirement
rates in industry, and therefore, these branches proba-
bly have the greatest shares of obsolete equipment.
About half of the machinery in the textile industry,
for example, is more than 20 years old.
Product Mix. Soviet writers are becoming increasing-
ly alarmed over the inability of the production system
to produce the correct mix of goods that would satisfy
consumer demand at prices close to present levels and
over the failure of quality controls at all stages.
According to one Soviet economist, "A significant
portion of the population consumes much of its time
searching for scarce goods."
Some typical product-mix problems have been noted
recently in the Soviet press. According to Soviet
figures, about three-fourths of the consumers who
Average annual
percentage change
1980
1981
1982
0.7
1.9
2.8
- 1.2
2.4
6.0
-4.0
2.0
-0.9
1.0
0.1
3.0
1.9
0.6
NA
2.4
0.8
NA
2.4
2.3
NA
-6.5
-2.6
0.7
6.0
4.9
NA
2.3
1.9
-0.1
0.8
1.3
1.0
4.5
3.4
-0.5
0.4
-0.7
-0.7
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
wish to purchase refrigerators want models with a
capacity of 200 to 240 liters, yet only 12 percent of
the units produced are of this size. About 150 percent
more small-capacity refrigerators than needed are
being manufactured. Meanwhile, the demand for
desired types of furniture is being met at a level of
85 percent, according to Soviet figures, while inven-
tories of unsold furniture have increased. Furniture
sets of modern design are in high demand. Only 60
percent of the demand for furniture sets is being met;
the sale of furniture for the kitchen, such as dinette
sets, meets less than 70 percent of the estimated
demand. At the same time, more sleeper sofas and
old-fashioned metal furniture than can be sold are
still produced. Of the 4 million washing machines
produced every year, only 5 percent are fully auto-
matic-little help to harried working women with
families; most washing machines require the operator
to wring the clothes manually at least once during the
washing cycle.
The scattering of production across various ministeri-
al jurisdictions reduces planning control over product
mix and quality. According to Soviet press reports, for
example, 40 percent of furniture production comes
from enterprises of the Ministry of Timber Industry;
the other 60 percent is manufactured by enterprises of
the Ministry of Local Industry, the Ministry of
Consumer Services to the Public, and other ministries.
Washing machines are manufactured by 24 enter-
prises belonging to six All-Union ministries.
Planning According to Consumer Demand. In recent
years, Soviet planners have stepped up their efforts to
ascertain the structure of consumer demand. The All-
Union Scientific Research Institute of Consumer De-
mand and Market Conditions (a successor to a body
set up in 1971) was established during the 1976-80
Five-Year Plan and appears to be actively pursuing its
mandate.10 Nevertheless, as USSR First Deputy Min-
ister of Trade P. Kondrashev points out, the study of
10 In addition, some 500 factory outlet stores have been set up in the
USSR to study demand for goods and publicize new products, as
well as to sell the factories' goods and to ease the divorce between
producer and consumer. These stores initially were not supposed to
have plan targets; sales were to reflect only consumer demand.
However, because these stores are often assigned sales targets, sales
personnel attempt to order higher priced items that will boost sales,
thus distorting data on consumer demand. In general, Soviet
estimates of demand are made upon past sales records (which
reflect unsatisfied demand) but appear to be increasingly based
upon consumer surveys of plans for purchases at current prices.
consumer demand is far from satisfactory: "The
situation is worst precisely where information on
demand is needed most of all-in the oblast wholesale
units and at retail enterprises where the main work
with requisitions and orders is done." According to
Kondrashev, even when adequate information on con-
sumer demand in a region is available, trade organiza-
tions sometimes do not base their orders on it.
Even in instances in which demand is predicted
correctly, the trade network often is not able to obtain
the needed goods. Orders from the trade network for
many goods are only fulfilled at a level of 60 to 80
percent by industry; meanwhile, other goods are
delivered in excess quantities, including goods not
ordered, according to trade officials. Although output
of goods for the light and food industries is supposed
to be established in accordance with orders from the
trade sector, this is generally not the case in practice.
For example, Soviet data reveal that the production of
toothbrushes in 1980 was set at 30 million less than
estimated demand; production, moreover, fell short of
plan by 9 million.
Supply-demand distortions run the gamut from big-
ticket to seemingly trivial items; the lack of the latter
probably contributes most to the shopping rat race. In
1981, for example, a Soviet correspondent for Litera-
turnaya Gazeta journeyed from Moscow to Krasno-
dar, the capital of a region that embraces a resort area
on the Black Sea. He deliberately left behind all the 25X1
usual personal items (soap, razor, cologne, toothbrush,
shaving cream, and so forth) to investigate reports
that such items were unavailable in Krasnodar stores.
The correspondent systematically visited every store
in the city but managed to find only the last package
of razor blades in one store and a child's toothbrush at
another (the toothbrush broke the following day). The
correspondent later, however, reported finding most of
the items he desired on the black market.
Enterprise Incentives the Fundamental Problem. Just
as local party officials often blame the trade network
for consumer-goods supply problems, retail trade offi-
cials are fond of reproaching industry for delivering
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
the wrong quantity and assortment. Industry officials
in turn point to insufficient or late deliveries of the
raw materials they need to manufacture consumer
goods. There is merit in all of these complaints. But
the key to the side-by-side existence of shortages and
surpluses is the lack of strong interest by factories in
the marketing side of their operations. To redress this,
government decrees in recent years have put increased
emphasis on contracts between trade organizations
and production enterprises, and on ruble-value sales of
factory output. By most accounts, however, neither of
these two types of measures has been effective.
Wholesale and retail trade organizations have shown
little interest in filing complaints against production
enterprises violating their contracts. Penalties paid by
factories are small and do not induce industry to
adhere to contract obligations. In addition, trade
organizations are reluctant to antagonize suppliers.
Furthermore, gross value of output and sales indica-
tors used to measure enterprise plan fulfillment have
caused additional product-mix distortions. In several
cases, industry has been able to increase the value of
ruble output without increasing the actual amount of
production by raising the share of higher cost goods or
by introducing "new" goods with a price higher than
justified by changes in production costs. For example,
according to the Soviet press, during 1976-80 the
production of steel enamelware at enterprises of the
USSR Ministry of Ferrous Metallurgy grew by
21 percent in rubles but declined by 26 percent in
physical measure, or by some 40 million units. In the
first half of 1981, republic ministries of local industry
fulfilled the plan for production of felt footwear in
rubles, but physical output fell 7 percent, or by
100,000 pairs. Similar developments in the production
of leather footwear, crockery, and wallpaper have
been described by the Soviet press. Manipulating the
assortment plan in this way leads to retail price
inflation as consumers pay higher prices for goods
that are essentially the same as lower priced items no
longer available.
The Problem of Quality Control. Despite much offi-
cial rhetoric devoted to the need to increase product
quality, the results have not been impressive. An
article in a recent issue of the official retail trade
journal declared, "The situation with regard to the
quality of consumer goods, in our view, not only is not
improving, but on the contrary is giving cause for
more anxiety as time goes on." The share of output
from light industry with the "Seal of Quality"-
meaning that the product meets international stand-
ards-was 13 percent in 1981. Although this is better
than the 2 percent cited in the Soviet press for 1975,
complaints about product quality at all levels are still
endemic and show no tendency to abate.
The USSR Ministry of Light Industry, for example,
considers 40 percent of the textile industry output in
the Russian republic (as well as several other repub-
lics) to be substandard. According to data gathered by
trade inspectorates, 15 percent of the furniture pro-
duced in the USSR is defective. In 1981, according to
USSR Minister of Trade Struyev, spot checks by
trade inspectorates of goods delivered to the trade
network showed 9 percent of the fabrics and leather
footwear and 7.5 percent of the clothes to be of
unacceptably low quality. Although trade enterprises
have the right to reject goods that do not meet the
quality standards claimed for them and exact fines in
return, little use is made of this prerogative. Only
obviously defective goods are turned away. Fines
usually are not sufficient to compensate for the
quality differences. In addition, retail trade organiza-
tions must meet sales targets and are thus reluctant to
reject goods that they stand some chance of selling.
Consumer dissatisfaction with the trade network is
not limited to the poor quality of goods. Some of the
chronic spot shortages and erratic distribution occur
because there is not enough inventory in wholesale
organizations to shift goods quickly in response to the
shifting requirements of retail outlets."
As a result of these inconsistencies between produc-
tion and consumer demand, 3 to 4 billion rubles worth
of unsalable goods accumulate in the trade network
every year, with an especially large amount noted by
Soviet open sources in 1981. Nonetheless, such inven-
tories amount to only about 1 to 1.5 percent of total
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
i,onnaennai
trade turnover; Soviet consumers may be dissatisfied,
but they have not stopped buying because they cannot
Wage increases remain a primary means of providing
incentives, and the regime plans to apply it in several
flagging areas of the economy. Coal miners, for
example, are receiving a 25-percent wage increase in
the 1982-83 period. Wages are slated to rise more
rapidly than the average in construction, rail trans-
port, and in some other problem sectors, as well as in
regions where poor living conditions cause high labor
turnover. Wage increases for some other groups,
find the goods they want.
Strategy in the 1981-85 Plan Period
Moscow's consumption strategy for the 1981-85 Plan
centers on continued restraints on income growth,
various measures to absorb purchasing power, and
increased output of quality foods. A curb on wage and
salary increases plays a leading role in the Plan. If
plans are adhered to, overall growth in average in-
comes from employment during 1981-85 will be about
15 percent:
? The average monthly wages of wage and salary
workers are to increase 14.5 percent by 1985, or at
an average annual rate of 2.7 percent.
? Payments to collective farmers are to increase
20 percent, or at an average annual rate of 3.7
percent.
Meanwhile, growth in transfer payments is planned at
23 percent (or 4.2 percent per year) in 1981-85, the
lowest rate for a five-year plan. If this target is met,
per capita increases in transfer payments will be
between 17 and 18 percent by 1985. As a result of
increased wages and transfer payments, per capita
money incomes will grow by roughly 16 percent by
1985, or about 3 percent a year, compared with the
4.1-percent average annual rate of 1976-80. In 1981
and 1982, wages of wage and salary workers grew at
rates below plan, and wages of collective farmers at
planned rates.
Growth of real income is likely to be appreciably less
as a result of retail price increases. The Chairman of
the State Price Committee has stated that, although
prices for "essential" goods will not rise, price in-
creases for other goods cannot be ruled out. In
addition, the price creep caused by the "new product"
pricing phenomenon and substitution of high-priced
for low-priced goods is likely to continue. If the
agricultural sector continues to falter, collective farm
market prices also will continue to rise. Throughout
the past decade, the average annual rate of inflation
in retail prices has been slightly under 2 percent. If
this pattern continues, growth in real per capita
income will be only about 1 percent a year
Not all groups will experience slower wage growth.
therefore, will be less than the planned average and 25X1
could contribute to morale problems.
As is always true of Soviet plans, wage increases are
not supposed to exceed productivity increases. In
1982, however, average monthly wages for industrial
workers grew by 3.4 percent while industrial produc-
tivity increased by only 1.5 percent.'Z For the 1981-85
period as a whole, moreover, growth in wages in
general is likely to exceed advances in productivity.
Wage payments are likely to rise by more than
2 percent a year, while-in line with recent trends-
productivity gains are very likely to fall below
2 percent a year. The planned average annual rate of
increase in labor productivity in both industry and
socialized agriculture of 4.2 percent during 1981-85 is
unrealistic.
Retail sales are to grow by slightly more than
4 percent per year during 1981-85. Since this planned
rate is higher than the likely increase in total dispos-
able income (3 percent per year), the plan implies a
slower growth of savings. Within the retail sales
categories, the supply of industrial consumer goods is
to grow at an average annual rate of almost 5 percent
during 1981-85. Production of durable goods alone is
to increase by almost 7 percent per year. These
targets are not likely to be met. Thus, to meet the
retail sales targets, increased imports of consumer
goods probably will be required.
Outlook
On balance, the regime appears to be taking a
cautious approach on consumer issues. Without im-
pinging on defense or industrial investment, it has
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
little room for maneuver until the Food Program pays
some return and more resources can be spared for the
production of soft goods and consumer durables. F_
Although the quality and assortment of manufactured
consumer goods will continue to improve somewhat, a
sellers market will continue to prevail, with lack of
responsiveness by manufacturers to consumer desire
still the rule. The most serious imbalances are likely
to be concentrated in those areas of consumption
where the quantities of goods and services demanded
and supplied are already most seriously out of line.
Only slow progress in mitigating these imbalances is
likely.
Imports and Retail Prices. Although imbalances in
some specific markets such as quality foods may
worsen, the overall disequilibrium in consumer mar-
kets is likely to remain under control through the
mid-1980s. Because growth in domestic output of
consumer goods may well be somewhat less than that
of incomes during 1981-85, the leadership will need to
compensate. Moscow could increase imports of con-
sumer goods and/or allow some measure of inflation
to absorb the increased purchasing power-through
selective official price increases and through unoffi-
cial price increases resulting from substitution of
higher-priced products and simulated innovation.F_
To maintain at least some growth in consumption,
Moscow will have to continue substantial imports of
grain, foodstuffs, and some manufactured consumer
goods. But because these imports would likely come at
the expense of machinery and technology imports,
Moscow probably has not yet decided whether to
increase its hard currency purchases of grain and
foodstuffs much beyond current levels. The Soviet
Union may instead increase the pressure on some of
its East European trading partners to deliver more
consumer goods.
Some leadership waffling on the longstanding com-
mitment to stable retail prices for basic goods has
appeared. A December 1982 Pravda article on the
waste of bread included letters by readers advocating
higher bread prices, and a contribution to the same
article by the first deputy minister of the food indus-
try lacked the usual promise of no price increases. In
his well-publicized visit with Moscow factory workers
in February 1983, Andropov left the door open to
price hikes, saying that "the path of rising prices ...
does not suit us as a general one, although it must be
said we do have certain distortions and discrepancies 25X1
in prices and we must eliminate them." But the
regime has held off widespread changes in food prices,
probably gambling that a good year in agriculture
would mean more foodstuffs in the shops for people to
buy, and that this (combined with price increases for a
range of nonfood goods and services in 1981 and early
1983) would sop up enough rubles to ease pressures on
supplies of quality foods.
Experiments in Planning. Andropov's approach to
the chronic mismatch between consumer wants and
the assortment and quality of manufactured goods is
not likely to yield significant results. Last July the
Andropov administration authorized a limited and
cautious experiment in industrial management. This
pilot project, to begin in January 1984, involves five
ministries, three of which produce primarily consumer
goods but are only republic ministries: the Ukrainian
Ministry of the Food Industry, the Belorussian Minis-
try of Light Industry, and the Lithuanian Ministry of
Local Industry. Most of the salient provisions of the
decree are restatements of provisions contained in the
two major industrial reform programs of the Brezhnev
era. The basic aims are to give managers more say in
the planning process, encourage technological renova-
tion, and provide for wider differentiation in basic 25X1
wage scales to reward higher qualifications and pro-
There is no mention of any changes in the centralized
rationing of producer goods or of any move away from
administered prices. As the first deputy chairman of
Gosplan explained, "The expansion of enterprises'
rights in planning and economic activity [in this
experiment] is to take place in conditions where the 25X1
decisive role of state centralized planning is pre-
served." The results of this experiment, like those of
previous economic test programs, are not likely to
hold up when applied on an economy-wide scale. This
is because factories involved in such experiments
generally receive priority attention from planners, a
condition which cannot be sustained when the pro-
gram becomes broadly based.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Andropov's insistence on approaching economic
change with considerable circumspection is evident
both in this July decree, and in his speech to service
veterans a month later:
Of course, comrades, in an economy of such
dimensions and complexity as ours, one must take
extreme care. Here more than anywhere the saying
is true that one should measure seven times and
cut once. It is for this reason that in making major
decisions, we try to scrupulously study each issue.
We embark on large-scale experiments to study
calmly and unhurriedly how the proposed innova-
tions work, and how they affect plan and labor
discipline, labor productivity, and the efficiency of
social production as a whole.
The General Secretary's reluctance to promote more
thoroughgoing changes in the economy probably
arises in part from his recognition of the importance
of guaranteed full employment in maintaining the
bond between state and society. The typical Soviet
citizen has an ingrained fear of unemployment and is
well aware that unemployment has been a major
problem in Western economies, and indeed, regards it
as a systemic rather than a transitory characteristic of
market economies. Successive Soviet regimes have
been well aware of this risk-averse attitude, and have
consistently pointed to full employment in the Soviet
economy as a major advantage provided by the sys-
tem. Such attitudes militate against reforms of the
Soviet economic system which might result in greater
responsiveness to consumer demand and a better
standard of living in the long term but involve the risk
of unemployment in the short- or mid-term.
Investment Priorities. Finally, some indications have
appeared that Moscow may allocate some additional
resources beyond those already included in the 1983
Plan for the food and light industries. Such alloca-
tions, however, might be at the expense of other
industrial sectors which supply inputs to agriculture.
How far the new leadership is willing to go in
supplying additional resources, rather than simply
shifting them among sectors supporting consumption,
will be a clearcut signal of its consumer orientation.
The 1984 economic plan and the discussions sur-
rounding the formation of the 1986-90 Plan will
provide some evidence on this question.
Consumption Levels and Popular Morale. The trends
in consumer demand and in consumer goods produc-
tion and distribution, along with Andropov's approach
to dealing with imbalances, mean that consumer
dissatisfaction is not likely to be mitigated soon.
Indeed, it may worsen as the share of the population
born after World War II increases, memories of
extreme hardship fade, and small improvements mean
less to a more demanding population. The leadership
will have to deal with the consequences of what is
likely to be at best only slow growth in consumption
for the duration of this decade.
The reactions of the populace to continuing consump-
tion problems are likely to be manifested primarily in
greater apathy toward the social and political values
of the sytem. Such apathy could be reflected in the
withholding of serious work effort, an increase in
illegal private activity, and greater alcoholism, all of
which would have a negative impact on labor produc-
tivity. In the current era of resource stringencies, this
could do more damage to the economy and be more
difficult for the regime to counter than an increase in
sporadic incidents of civil unrest-an activity that the
regime is better equipped to handle.
Soviet leaders, as noted earlier, are well aware of the
importance of high worker morale for the economy.
Like Western observers, however, they cannot predict
the behavior of the population on the basis of some
model that integrates the connections among levels of
living, regional and nationality differences, tolerance
for greater discipline and repression, and the many
other influences on the attitudes of the labor force. In
a decade of slower economic growth, they will have to 25X1
grope for the right combination of resource allocation
and social policies that will permit desired levels of
investment and defense spending while not undercut-
ting internal order and stability or the basis for
economic growth and military power by miscalculat-
ing the tolerance of the Soviet population.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Appendix A
USSR: Trends in Savings
During most of the period since 1965, the relative rise
in personal savings has far exceeded the increase in
personal incomes. The stock of savings has grown
nearly eightfold since 1965 (sevenfold on a per capita
basis), with the highest growth in the mid- and late-
1970s. In 1980, 1981, and 1982, however, net incre-
ments to the stock of savings fell off sharply, from
some 15 billion rubles in 1979 to 8.6 billion rubles in
1982. Increments to saving on a per capita basis also
dropped steeply, from 51 rubles in 1979 to 25 rubles
in 1982, (real 1970 rubles) and the ratio of incremen-
tal savings to incremental disposable income fell
(table 1).
The ratio of savings to personal disposable income in
the Soviet Union is near that of the United States,
generally below that of other Western industrialized
countries, near that of Hungary, and below some
other East European countries (table 2). Over the long
term, marginal rates of saving have steadily decreased
(table 3). In the USSR, as in market economies,
savings are a function of several factors, including
national wealth, income distribution, investment op-
portunities, cultural patterns, pension plans, and guar-
antees against health catastrophies.
The international comparisons of average savings
rates (table A- 1) and of assets/spending ratios (appen-
dix B) call into question the suspicion that most
savings in the USSR are in some sense forced and
serve as a reminder that Soviet citizens save for a
number of reasons:
? The general unavailability of consumer credit and
the relatively high prices of consumer durables and
luxury goods mean that Soviet consumers must be
prepared to pay sizable amounts of cash for a wide
range of goods. In 1979, for example, only 4 percent
of nonfood retail sales were made on a credit basis.
? Chronic irregularity in the supply of consumer
goods encourages increased household liquidity.
Prudent consumers wish to be in a position to buy
goods quickly when they come on the market. The
need for liquidity stimulates savings both in the
form of cash hoards and savings deposits (67 percent
of all savings deposits are demand deposits).
? Like citizens in Western economies, Soviet consum-
ers save to accrue interest. For the Soviet citizen,
savings deposits are the only widely available legal
means of investment. 25X1
? Soviet consumers, like their Western counterparts,
save to spread income and consumption more evenly
over their lifespan. Soviet parents and relatives also
save to help young people set up households.
Finally, the response of the Soviet population to 25X1
rumors of price increases indicates that forced savings
are not so large as to pose a threat to social order. In
September 1981, for example, Moscovites were gener-
ally aware of the impending sharp price increases for
several categories of goods nearly a week before they
were posted. Although US Embassy officials observed
some increased queuing, they reported only a few 25X1
instances of panic buying and scuffling-mostly at
retail outlets for alcoholic beverages.
25X1
Data are not available to establish a reliable time
series for either the amount of currency in circulation
or the amount of income from some privately earned
income-legal or illegal." Changes in either of these
could affect the analysis of savings behavior. For
example, large increases in the money supply, as some
Western scholars argue, might indicate that the popu-
lace has increased its cash hoards and that savings in
relation to income have not decreased. A jump in
privately or illegally earned income, on the other
hand, might indicate that savings in relation to in-
come dipped more sharply than our data show be-
cause we are assuming that private and/or illegal
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
income increases in proportion to the incomes that we
track. In the absence of reliable data for either area,
we assume that savings bank data are representative
of trends in all savings and that income that cannot be
accounted for follows the same trend as income for
which data are accessible.
These caveats aside, the drop in savings rates can be
attributed to an acceleration in consumer spending in
1980 and 1981 not matched by an equivalent rate of
growth in total personal disposable income. Looked at
another way, the drop in savings rates can be ascribed
to slower growth in real incomes that led consumers to
cut back on savings. Real personal disposable money
income grew annually by 2.1 percent in 1980-81,
compared with 3.4 percent annually in 1976-79."
Preliminary data for 1982 suggest that because of
inflation the growth in the real income of the popula-
tion was halted last year. Steep price increases for
alcoholic beverages and several other goods in late
1981 probably were responsible."
Growth in savings will probably continue to slow in
the 1980s as inflation rates approach wage rate
growth and as the proportion of wage earners, who
tend to save, shrinks, while the share of pensioners,
who draw down savings, grows. The labor force,
which grew by nearly 20 million during 1971-80, is
expected to increase by roughly 9.5 million during
1981-90. During the 1980s, 9.5 million people will
reach pension age-more than twice the level of the
1970s.
" Inflation is measured by an "alternative" index of prices in state,
cooperative, and collective farm outlets constructed by CIA (see
appendix C)
" Since 1977, five rounds of retail price increases have been
announced, covering so-called luxury goods, some categories of
domestic transportation, alcohol and tobacco products, and other
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Table A-1
USSR: Marginal and Average
Propensities To Save by Year
Net Additions to Real Per Capita Disposable Average Marginal
Real Per Capita Savings Money Incomes (1970 rubles) Propensity Propensity
(1970 rubles) To Save a To Save b
1981
28.307
-5.721
897.07
-0.91
0.032
1982
24.530
-3.777
896.26
-0.81
0.027
Source: Total savings are savings deposits plus bond purchases
minus net borrowing. Bond purchases (state loans) and net borrow-
ing are from tables C-1 and C-2 in appendix C. Per capita savings
are obtained by dividing total savings by midyear population, which
is from US Department of Commerce, Bureau of Economic
Analysis, Foreign Demographic Division; per capita savings deflat-
ed by the "alternative" price index.
a Average rates of saving are real per capita savings as a share of
real per capita disposable money incomes.
b Marginal rates of saving are the annual change in real per capita
savings as a share of the annual change in real per capita disposable
money incomes.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Table A-2
USSR and Selected Countries:
Net Additions to Savings as a Percent of
Personal Disposable Income
Per Capita GNP
more than $9,000
Per Capita GNP
$7,001 to 9,000
Per Capita GNP
$5,001 to 7,000
Per Capita GNP
$3,001 to 5,000
Bulgaria
8.7
8.0
6.7
4.3
3.3
7.4
6.0
5.5
Hungary
4.2
4.1
4.3
4.9
5.4
3.1
2.5
3.6
Poland
2.5
4.8
3.1
3.3
3.2
3.6
2.4
8.7
USSR
5.0
5.5
5.1
5.6
5.6
5.6
3.6
3.1
Source: Countries are grouped by per capita GNP in 1980 as given
in Herbert Block, The Planetary Product in 1980, distributed by
Bureau of Public Affairs, US Department of State, 1981; ratios for
Western countries from International Economic Indicators, June
1981, US Department of Commerce; ratios for USSR derived from
Narodnoye khozyaystvo, 1980, and column 3, table 3 of appendix
C of this paper; ratios for East European countries derived from
Statisticheskiy yezhegodnik stran-chlenov SEV, 1980, and Alton
et.al., Research Projects on National Income in East Central
Europe, Nos. 70-77, 1982.
25X1
Confidential 22
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Lontlaentlal
Table A-3
USSR: Marginal Rates of Savings
1965-70 0.113
1970-75 0.110
1975-79 0.084
a Marginal rates of savings are the annual change in real per capita
savings as a share of the annual change in real per capita disposable
money incomes adjusted to a trend line basis for the period.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
Appendix B
USSR and Selected Countries:
Ratios of Assets to Consumption Outlays
Both Western and Soviet writings have frequently
interpreted the seeming growing imbalances in con-
sumer markets-as manifested, for example, in long
lines and frequent resort to rationing-and the large
annual increments in savings of the 1970s as evidence
of excessively large increases in purchasing power.
According to this view, pervasive and overt inflation is
avoided only because the authorities keep a tight lid
on prices in state outlets; the regime's commitment to
price stability then gives rise to repressed inflation,
reflected in the accumulation of large stores of essen-
tially involuntary savings.
In this interpretation, Soviet household savings are
formed largely as a consequence of money-goods
imbalance-that is, goods are unavailable in suffi-
cient quantity to match purchasing power. Indeed, in
recent years a spate of articles in Soviet economic
journals and in the popular press, citing the eightfold
growth in the stock of Soviet personal savings since
1965, have called for better economic planning to
improve the money-goods balance. Some Soviet econ-
omists have noted in the open literature, for example,
that as much as 50 percent of household savings may
have accrued from an imbalance between purchasing
power and the availability of desired consumer goods.
In a recent article, economist and academician V. D.
Belkov said that "the consequences of the commodity-
money imbalance have outgrown the framework of
the economy and have become a great social evil.
Therefore, when ranking the goals and tasks of eco-
nomic development for the immediate future, the
achievement and maintenance of a balance should be
put in first place." Soviet planners fear the effects of
higher-than-planned levels of purchasing power upon
retail sales plans, work incentives, and black-market
activity.
To test the proposition that a failure to control
incomes and/or to supply enough goods and services
to the population has led to a savings overhang in the
USSR, we have compiled ratios of gross and net
financial assets to consumer spending in the Soviet
Union and selected other countries. The results of our
testing indicate that most personal savings in the
USSR are not forced. Soviet financial assets are
defined as currency plus bank deposits plus holdings
of state bonds. Soviet financial holdings were put on a
net basis by subtracting long-term debt and credits to
the population of purchases in state retail and cooper-
ative networks." 25X1
The financial assets of Soviet citizens are overwhelm-
ingly in the form of savings accounts, which amounted
to 166 billion rubles at the end of 1981. The Soviets
publish no figures on currency holdings, but we 25X1
assume that they are 40 percent of savings deposits.
The basis of this admittedly notional figure is a
statement by Gosbank Chairman Alkhimov that cur-
rency holdings are far less than half of such deposits.
We also compiled a series for holdings of state bonds
(which may be considered fairly liquid because they
may be sold at banks) on the basis of recently released
data in the Soviet press. Finally, some information on
personal-sector debt is published by the Central Sta-
tistical Administration. 25X1
On balance, we believe that our estimate of the Soviet
savings/ spending ratio is on the high side because:
? Our estimate of the population's currency holdings
seems, on the strength of the Alkhimov statement,
to be high.
? Our series on bond holdings includes holdings by 25X1
collective farms as well as individuals.
? The data on debt exclude some forms of financial
liabilities such as short-term debts.
The ratio of financial assets to consumption outlays
for the USSR is quite low in comparison with those
for the United States and the United Kingdom, where
16 Our calculations include only financial assets since tangible (or
physical) assets do not reflect unsatisfied purchasing power. Fur-
thermore, most financial assets are liquid, and a hypothesis of a
large, potentially destabilizing savings overhang presupposes that
the overhang is composed primarily of money or assets readily
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Contidenriall
the phenomenon of unrequited purchasing power is
absent (table B-1). The ratio for the USSR has
doubled since 1965, and recently stabilized; for the
two market economies the ratio has declined, a devel-
opment which largely can be explained by shifts of
financial assets into holdings of tangible assets and
growth of consumer debt. In relation to Hungary,
however-a CEMA country where consumer markets
are largely in equilibrium and queues and rationing
are generally absent-the Soviet ratio is somewhat
higher. But the ratio of gross personal financial assets
(debt is not subtracted) to household outlays
(table B-2) is roughly the same in both countries,
suggesting that the degree of unspendable purchasing
power in the USSR is no worse than in Hungary."
The gross asset/consumer spending ratio in Bulgaria
is considerably higher than in either the USSR or
Hungary. (Data for Bulgaria on net financial assets
are not available.) Since imbalances in Bulgarian
consumer markets have been no worse than in the
USSR, the higher Bulgarian ratio also argues against
the existence in the USSR of a large, involuntary
savings overhang.
Both the net and gross ratios between financial assets
and consumer spending are higher in the USSR than
in Poland. At first glance, this may seem odd because
supply and demand imbalances have been more severe
in Poland than anywhere else in Eastern Europe. The
Poles, however, have allowed a far greater degree of
overt inflation than any other Warsaw Pact country,
so that rising prices have drained money from con-
sumers that otherwise might have increased savings.
The Soviet Government, on the other hand, has kept
the rate of inflation for consumer goods at a relatively
low level through subsidies in two subsectors of the
consumer economy-housing and foodstuffs; Moscow
has been especially reluctant to anger workers with
price increases for consumption necessities at a time
of low income growth.
" The case for using gross assets-that is, for not subtracting
personal debt-rests on the assumption that savings are accumulat-
ed independently of debt in countries such as the USSR and
Hungary, where yearly debt payments are likely to be small.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
Table B-1
USSR and Selected Countries:
Ratio of Net Personal Financial Assets
to Household Outlays for Consumption, 1960-81
0.44
1968
0.46
1969
1971
1972
2.91
2.47
1973
2.92
NA
2.67
NA
2.38
1.57
0.52
2.47
1.45
0.52
1977
1.57
0.52
1978
1979
1980
1981
a End-of-year net financial assets divided by same year household
outlays for consumption.
Sources: Figures for US derived from data provided by the Flow of
Funds Section, Division of Research and Statistics, Board of
Governors of the Federal Reserve System and from Economic
Report of the President, Feb. 1982; figures for UK derived from
Financial Statistics, Feb. 1982, and Economic Trends, Annual
Supplement, 1982 No. 238; United Kingdom Central Statistical
Office. Financial assets for the US personal sector include deposits
and credit market instruments (this category includes currency
holdings), corporate equities, life insurance reserves, pension fund
reserves, and equity in noncorporate business; financial liabilities
for the US personal sector include credit market instruments (home
mortages, other mortages, installment consumer credit, and bank
loans) and deferred and unpaid life insurance premiums. UK
private-sector financial assets include currency holdings, money
market instruments (this category includes corporate stocks), sav-
ings deposits and securities, and life and pension funds; financial
liabilities for the UK private sector include bills and short-term
loans, and other loans. Figures for the USSR were derived from
N. Kh., various years, and our estimates of household outlays for
consumption are explained in table 1. Since financial accounting for
0.29
0.33
0.38
0.40
0.40
0.38
0.38
0.40
0.37
the Soviet personal sector is not available, holding of currency by
individuals is assumed to be 40 percent of the yearly amounts of
personal savings in banks, which may overstate the case. State
Bank Chairman Alkhimov has stated that the ratio of currency
holdings to savings bank deposits is "far less" than .5. This, plus
personal savings deposits plus holdings of state bonds by the
population and collective farms, minus the long-term debt of the
population credit granted to the population for the purchase of
goods from the state retail and cooperative networks was considered
the equivalent of net financial assets for the personal sector. The
ratio for Hungary was derived from data in International Monetary
Fund, International Financial Statistics, August 1982, and Thad
P. Alton, et al., "Personal Disposable Money Income of the
Population in Eastern Europe, 1970-198 1," Research Project on
National Income in East Central Europe Occasional Papers, 1982,
and Staticheskii ezhegodnik stran-chlenov soveta ekonomicheskov
vzaymopomoshchi, 1981. The ratio for Poland was derived from
Alton et al., and from Rocznik statystyczny, 1981, which gives
savings, debts, and currency holdings of the population. The ratio
for Bulgaria was derived from data in Alton et al. and Statistiches-
kii Ezhegodnik; currency holdings of the population were assumed
to be 40 percent of savings.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
ContHdennai
Table B-2
USSR and Selected Countries:
Ratio of Gross Personal Financial Assets
to Household Outlays for Consumption, 1965-81
1972
0.60
4.17
3.16
1.19
0.43
1973
0.63
3.84
1.28
0.47
1974
0.66
3.52
1.36
0.51
1975
0.69
3.66
2.17
1.34
0.74
0.52
1976
0.73
3.73
2.03
1.36
0.76
0.50
1977
0.77
3.61
2.17
1.36
0.77
0.50
1978
0.81
3.61
2.09
1.42
0.80
0.50
1979
0.85
3.67
2.03
1.53
0.78
0.52
1980
0.85
3.83
2.03
1.32
0.78
0.52
1981
0.84
3.61
NA
1.34
0.81
NA
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Appendix C
USSR: Calculations of Personal Money Incomes,
Deductions, and Personal Disposable Money Incomes, 1950-82
Table C-1
USSR: Personal Money Income
1 Total personal money income
45.42
62.55
84.64
122.78
133.64
143.98
159.28
169.48
182.19
193.83
206.15
2 Gross earnings of wage and
salary workers
32.00
44.51
59.97
89.05
95.83
103.40
115.09
123.31
132.05
140.02
148.74
3 Wage payments to collective
farm members
1.18
3.06
4.94
8.53
10.23
11.88
12.54
12.82
12.99
13.24
13.62
4 Net incomes of households from
sale of farm products
4.18
4.11
5.39
6.39
7.15
6.84
7.35
6.90
8.26
8.97
9.39
5 Profits distributed to
cooperative members
NA
0.01
0.02
0.02
0.02
0.02
0.02
0.02
0.03
0.03
0.04
6 Military pay and monetary
allowances
3.55
3.40
2.94
3.21
3.28
3.42
3.56
3.69
3.82
4.12
4.34
7 Transfer payments
3.87
6.00
10.39
15.01
16.55
17.71
19.93
21.80
24.04
26.28
28.70
8 Pensions and welfare
payments
3.37
5.22
9.68
13.85
15.18
16.22
18.27
19.92
21.96
23.89
25.94
9 Pensions
2.40
3.20
7.20
10.60
11.80
12.60
14.00
15.00
16.20
18.00
19.80
10 Welfare payments
0.97
2.02
2.48
3.25
3.38
3.62
4.27
4.92
5.76
5.89
6.14
11 Stipends to students
0.46
0.74
0.60
0.90
1.00
1.10
1.18
1.30
1.30
1.40
1.50
12 Insurance indemnities
0.04
0.04
0.11
0.26
0.37
0.39
0.48
0.58
0.78
0.99
1.26
13 Loan service
0.51
1.43
0.70
0.10
0.10
0.20
0.20
0.20
0.10
0.10
0.08
14 Net borrowing
0.07
-0.09
0.06
0.09
0.02
-0.04
-0.06
-0.04
-0.03
-0.03
-0.01
15 Interest on savings
0.06
0.12
0.23
0.38
0.46
0.55
0.65
0.78
0.93
1.10
1.25
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Table C-1 (continued)
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
I Total personal money income
218.56
234.42
249.01
264.60
276.14
291.09
303.14
320.30
333.67
348.17
2 Gross earnings of wage and
salary workers
157.83
168.97
178.74
189.36
198.14
208.41
216.72
228.01
235.90
245.02
3 Wage payments to collective
farm members
14.33
14.66
14.34
15.05
15.58
15.98
16.17
16.61
16.67
17.41
4 Net incomes of households from
sale of farm products
9.59
10.02
10.07
10.99
10.99
12.36
13.12
14.34
15.71
16.59
5 Profits distributed to
cooperative members
0.04
0.03
0.03
0.03
0.04
0.03
0.03
0.04
0.05
0.05
6 Military pay and monetary
allowances
4.37
4.77
4.86
4.93
4.96
5.02
5.10
5.14
5.16
5.20
7 Transfer payments
30.90
33.27
38.03
40.93
42.79
45.30
47.56
51.28
54.49
58.10
8 Pensions and welfare payments
27.49
29.17
33.39
35.42
36.84
38.85
40.79
44.01
46.43
49.60
9 Pensions
20.80
22.10
24.40
25.70
27.10
28.90
30.60
33.00
35.40
37.80
10 Welfare payments
6.69
7.07
8.99
9.72
9.74
9.95
10.19
11.01
11.03
11.80
11 Stipends to students
1.90
2.10
2.20
2.20
2.30
2.40
2.40
2.50
2.50
2.50
12 Insurance indemnities
1.51
2.00
2.44
3.31
3.65
4.05
4.37
4.77
5.56
6.00
13 Loan service
0.11
1.10
1.10
1.20
1.20
1.22
1.31
1.31
1.70
1.70
14 Net borrowing
-0.03
-0.02
-0.03
-0.02
0.02
0.05
0.08
0.07
0.29
0.27
15 Interest on savings
1.42
1.62
1.87
2.13
2.42
2.72
3.05
3.50
3.70
3.83
a Sources and methodology are given on the following pages
Sources and methodology for table C-1 are as follows:
1 Total money personal income:
a All years-Sum of lines 2 through 7 and 13
through 15.
2 Gross earnings of wage and salary workers:
A. Leedy, International Population Reports Series,
p. 95, no. 51, Washington, DC, p. 14. The average
annual number of artisans is reported in N. Kh.
1964, p. 545. The average annual industrial earn-
ings are from Trud v SSSR, Moscow, 1968, p. 140.
Producers' cooperatives were converted into state
enterprises in 1960, and members were then classi-
fied as state workers.
a 1950, 1955-Narodnoye khozyaystvo SSSR v
1974 godu, Moscow, 1975, p. 549, 562 (hereafter,
N. Kh. and the appropriate year). Includes gross
earnings of cooperative artisans of .88 billion rubles
in 1950 and 1.17 billion rubles in 1955, respective-
ly. Cooperative artisans earned a wage equal to
two-thirds that of industrial wage and salary work-
ers according to US Bureau of the Census, Produc-
ers' Cooperatives in the Soviet Union, by Frederick
b 1960, 1965-74-N. Kh. 1975, p. 531, 546. 1975-
82-N. Kh. 1980, p. 357, 364. N. Kh. 1982,
pp. 364, 370. Gross earnings are the product of the
average annual number of wage and salary workers
and average monthly earnings, adjusted to an annu-
al basis.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
3 Wage payments to collective farm members:
a 1950, 1955, 1960-David W. Bronson and
Constance B. Krueger, "The Revolution in Soviet
Farm Household Income, 1953-67," in James R.
Millar (ed.), The Soviet Rural Community, Univer-
sity of Illinois Press, Urbana, 1971, p. 250.
b 1965-80-Derived for each year as the product of
(1) official statistical handbook data regarding total
wage payments (money plus in-kind) made by col-
lective farms to collective farm members for their
work in socialized activity of the farms and (2) the
share constituting money payments only. Data for
total wage payments (money plus in-kind) are avail-
able for 1965-70 in Sel'skoye khozyaystvo SSSR,
Moscow, 1971, p. 479; for 1971-74 in N. Kh. 1975,
p. 414; for 1975-82-N. Kh. 1980, p. 254, N. Kh.
1982, p. 255. Money payments accounted for 79.4
percent of total payments (money plus in-kind) in
1965 (V. N. Zhurikov and V. I. Solomakhin, com-
pilers, Spravochnik po oplate truda v kolkhozakh,
Moscow, 1973, p. 10); 85.6 percent in 1966; 92.4
percent in 1967; 93.7 percent in 1968; 96.9 percent
in 1969 (S. V. Rogachev, Ekonomicheskiye zakony
i razvitiye sel'skogo khozyaystva, Moscow, 1973,
p. 217); and 93.6 percent in 1970 (Zhurikov and
Solomakhin, op. cit.). Money payments are estimat-
ed to amount to 94 percent in 1971, in line with the
1970 share; to 95 percent from 1972 through 1976,
and 96 percent during 1977-82. Withholdings from
social security and social insurance are then de-
ducted from 1965 on. According to V. V.
Kochtarev, Rol' kredita v povyshenii effektivnosti
kolkhoznogo priozvodstva, Moscow, 1977, p. 29,
withholdings from payments to collective farmers
were .599, 1.047, 1.440, and 1.584 billion rubles in
1965, 1970, 1973, and 1974, respectively. Accord-
ing to I. A. Usatov, Ekonomika i fmnansy pred-
priyatiy, Moscow, 1981, p. 250, withholdings for
social security in 1979 were 6 percent of gross
kolkhoz income. Usatov, p. 234, and L. S. Galimon,
Finansy sel'skogo khozyaystva, Moscow, 1976,
p. 207, state withholdings for social insurance are
calculated as 2.4 percent of payments to labor.
4 Net income of households from sales of farm
products:
a 1950, 1955, 1960, 1965-75-Net income of house-
holds from sales of farm products is derived as the
difference between (1) total money income of house-
holds from sales of farm products-sales to state
procurement and state and cooperative trade orga-
nizations, sales in collective farm exvillage markets
and commission trade, and sales of livestock to
collective farms and (2) money outlays-purchases
from outside the sector of materials and services
used in production of these agricultural products
and indirect taxes. Included in indirect taxes are
fees charged collective farm market traders and
taxes levied on livestock holdings of households. A
detailed methodology is given in "USSR: Gross
National Product Accounts, 1970," A(ER) 75-76,
Nov. 1975.
b 1976-82-The above series is extended by using the
growth rates derived from adding the sales of farm
products to consumer co-ops and the sales of farm
products at collective farm markets found in N. Kh.
1980, p. 421, N. Kh., 1982, p. 424.
5 Profits distributed to cooperative members:
Consumer cooperatives constitute a separate trade
network, paralleling that of the state stores but de-
signed primarily to service rural areas with stores and
restaurants. A cooperative is usually composed of
residents of a single village. Nominally, the coopera-
tive system is controlled by its members, but the
government actually exercises strict control over prof-
its, prices, and earnings. A small share of profits is
distributed to members. During 1962-65, 68.4 million
rubles were distributed to cooperative members ac-
cording to A. P. Ilyushin (ed.), 50 let sovetskoy
potrebitel'skoy kooperatsii, Moscow, 1965. p. 142.
Total cooperative profits for those years were 3,389
million rubles. (N. Kh. 1963, p. 637 and N. Kh. 1964,
p. 747.) Dividing distributions by profits results in a
distribution rate of 2.02 percent. This rate is applied
to reported profits for each year.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
a 1950, 1960, 1965-67-N. Kh. 1967, p. 857.
b 1955-N. Kh. 1960, p. 843.
c 1970-74-N. Kh. 1975, p. 725.
d 1975-82-N. Kh. 1980, p. 503, N. Kh., 1982,
p. 514.
6 Military pay and monetary allowances:
a CIA series in current rubles.
7 Transfer payments:
a All years-Sum of lines 8, 11, and 12.
8 Pensions and welfare payments:
The Soviet Union has established an extensive pro-
gram of social services covering a wide range of
contingencies. The state social security program-
which includes benefits for sickness, maternity, and
large families, and pensions for old age and disabil-
ity-covers workers in state enterprises. Since 1965, a
similar but more limited program has existed for
collective farmers. Pensions and welfare payments are
derived as the difference between total outlays for
social security and social insurance, including pen-
sions, and the sum of outlays for health resorts and
sanitoria, kindergartens and pioneer camps, and
miscellaneous.
a 1950, 1968-69-N. Kh. 1969, p. 771, 774.
b 1955-N. Kh. 1958, p. 905-906, adjusted, assum-
ing relationship between expenditures in 1950 as
reported in N. Kh. 1958, p. 905-906, and in N. Kh.
1969, p. 771, 774, applied in 1955.
c 1960, 1966-67-N. Kh. 1968, p. 776, 779.
d 1965, 1970-74-N. Kh. 1975, p. 744, 746.
e 1975-82-N. Kh. 1980, p. 381, 527, N. Kh. 1981,
p. 419, 564, N. Kh. 1982, p. 381.
State workers and collective farmers are given pen-
sions for permanent disability, survivor, old-age, and
long service.
a 1950, 1968-69-N. Kh. 1969, p. 758.
b 1955-Estimated to be 72 percent of pensions and
welfare payments, based on the relationships exist-
ing in 1950 and 1960.
c 1960, 1966-67-N. Kh. 1968, p. 776.
d 1965, 1970-74-N. Kh. 1975, p. 744.
e 1975-82-N. Kh. 1980, p. 524, N. Kh. 1981, p. 564,
N. Kh., 1982, p. 381.
10 Welfare payments:
a Total pension and welfare payments (line 8) less
pensions (line 9).
11 Stipends to students:
a 1950, 1955-Raskhody na sotsial'no-kul'turnye
meropriyatiya po gosudarstvennomu byudzhetu
SSSR, Moscow, 1958, p. 46.
b 1960, 1969-70-N. Kh. 1970, p. 537.
c 1965, 1970-75-N. Kh. 1975, p. 568.
d 1966-68-Estimates based on numbers of students
in higher education (N. Kh. 1968, p. 682, and
N. Kh. 1969, p. 675) and average stipend paid in
1965 and 1969.
e 1976-81-N. Kh. 1980, p. 381, N. Kh. 1981, p. 419,
N. Kh. 1982, p. 381.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
Sum of compensation received for personal property
and life and accident insurance claims.
a 1950, 1955, 1960, 1965-66-G. P. Kosyachenko,
et. al., 50 let sovetskikhfinansov, Moscow, 1967,
p. 347-348.
b 1967-68-A. G. Zverev, Natsional'nyy dokhod i
(pansy SSSR, Moscow, 1970, p. 282.
c 1969-Ekonomicheskaya gazeta, No. 41, 1971,
p. 6.
d 1970-Finansy SSSR, No. 1, 1971, p. 10.
e 1971-72-Based on Ekonomicheskaya gazeta,
No. 41, 1971, p. 6, and Finansy SSSR, No. 4, 1973,
p. 8.
f 1973-Finansy SSSR, No. 4, 1974, p. 14.
g 1974-Finansy SSSR, No. 6, 1975, p. 59.
h 1975-Finansy SSSR, No. 5, 1976, p. 17.
i Indemnities for 1976-80 estimated by applying in-
demnities-to-premia ratio (618) for the 1976-80
period as a whole to the premia figures for individ-
ual years 1976-80. A total of 20.167 billion rubles in
indemnities was paid in the 1976-80 period accord-
ing to Finansy SSSR, No. 10, 1981, p. 5.
j 1981, estimated. 1982, Pravda, 6 June 1983, p. 3.
13 Loan Service:
a 1950, 1955-N. Kh. 1958, p. 900.
b 1960, 1965-68-N. Kh. 1968, p. 774.
c 1969-70-N. Kh. 1970, p. 730.
d 1971-N. Kh. 1922-72, p. 482.
Since 1971, budget reporting has carried no item on
loan service. Estimates for 1972 forward are based on
the following:
e 1972-73-Den gi i kredit, No. 1, 1974, p. 4. In
1972 and 1973, 2.6 billion rubles and 3.6 billion
rubles of 3 percent lottery bonds were sold
respectively.
f 1974-75-Den gi i kredit, No. 11, 1974, p. 90. The
government resumed redemption of the subscription
loans in December 1974. In 1974 and 1975,
1 billion rubles were to be paid to the population.
Total loan service for each year also includes an
estimated 0.1 billion rubles of payment for
3-percent lottery loans. Finansy SSSR, No. 4, 1976,
p. 24, confirms that in 1974-75, 2 billion rubles of
loans were paid off.
g 1976-Loan repayments are estimated at 1.1 bil-
lion rubles. Finansy SSSR, No. 1, 1976, p. 6,
confirms that loan repayments to the population are
continuing. Finansy SSSR, No. 12, 1976, p. 7,
states that the plan for 1977 loan repayments is 1.2
billion rubles. Three-percent lottery winnings are
continued at 0.1 billion rubles, a reasonable esti-
mate according to Den'gi i kredit, No. 1, 1975, p. 8,
and No. 4, 1976, p. 5.
i Total lottery bond holdings by the population are 7
billion rubles. Izvestiya sovetov narodnykh deputa-
tov SSSR, 1 Oct 1981, p. 6. Pravda, 23 Oct 1981,
states that the plan for 1981 loan repayments is 1.5
billion rubles. 1982 estimated.
The difference between long-term loans to the popula-
tion outstanding at the end of the given year and loans
outstanding at the end of the previous year.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
a 1950, 1955-Vestnik statistiki, No. 2, 1960, p. 89-
92.
b 1960-N. Kh. 1962, p. 639.
c 1966-68-N. Kh. 1968, p. 779.
d 1969-N. Kh. 1969, p. 774.
e 1970-N. Kh. 1970, p. 735.
f 1971-75-N. Kh. 1975, p. 747.
g 1976-81-N. Kh. 1980, p. 528, N. Kh. 1982, p. 526.
15 Interest on savings:
State savings banks offer the following major types of
accounts for individuals:
? Demand (vklady do vostrebovaniya) paying 2 per-
cent yearly interest;
? Time (srochnyye vklady) paying 3 percent yearly
when held for more than 6 months;
? Lottery deposit (vyigryshnyye vklady) paying an
average of 3 percent yearly in winnings. (A. P.
Sakharov and V. K. Chirkov, Operatsii sberegatel-
'nykh kass, Moscow, 1973, p. 21-23).
For all years except 1950, interest payments are
assumed to be 2.2 percent of average annual reported
deposits, based on Vestnik statistiki, No. 1, 1967,
p. 22, which stated that interest on savings amounted
to 383 million rubles in 1965-2.2 percent of average
annual deposits in that year. Demand deposits make
up the bulk of savings accounts, amounting to 73.1
percent in 1971 according to Den'gi i kredit, No. 8,
1971, p. 68. The same article stated that no signifi-
cant changes occurred in the distribution of deposits
by category during 1965-70. In 1975, the proportions
remained about the same; approximately 70 percent
of savings deposits were in long-term accounts accord-
ing to Finansy SSSR, No. 4, 1976, p. 22.
For 1950, however, interest payments are assumed to
equal 3 percent of total deposits because, according to
Vestnik statistiki, No. 1, 1967, p. 22, interest pay-
ments were lowered from 3 to 5 percent to 2 to 3
percent in 1955.
a 1950, 1968-69-N. Kh. 1969, p. 585.
b 1955, 1968-69-N. Kh. 1969, p. 585.
c 1966-67-N. Kh. 1967, p. 699.
d 1965, 1970-75-N. Kh. 1975, p. 597.
e 1976-77-N. Kh. 1977, p. 434.
f 1978-80-N. Kh. 1980, p. 408.
g 1981-82-N. Kh. 1982, p. 414.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
Table C-2
USSR: Deductions From Personal Money Income, 1950-82 a
1 Total deductions
6.92
8.77
6.90
9.89
10.95
12.03
13.69
15.26
16.97
18.45
20.22
2 Direct taxes
3.58
4.83
5.60
7.70
8.44
9.32
10.50
11.60
12.74
13.72
14.79
3 Personal income tax
2.04
3.55
4.64
6.77
7.50
8.36
9.50
10.54
11.61
12.54
13.57
4 Agricultural tax
0.80
0.44
0.40
0.36
0.35
0.35
0.34
0.33
0.33
0.32
0.31
5 Bachelor and small family tax
0.74
0.84
0.56
0.57
0.59
0.61
0.66
0.73
0.80
0.86
0.91
6 Local taxes
0.28
0.29
0.14
0.17
0.19
0.19
0.20
0.19
0.18
0.20
0.22
7 State loans
2.70
3.14
0.06
0.18
0.22
0.13
0.28
0.36
0.47
0.33
0.34
8 Trade union dues
0.24
0.36
0.55
0.86
0.96
1.08
1.20
1.28
1.38
1.45
1.54
9 Party membership dues
0.08
0.11
0.15
0.24
0.27
0.29
0.32
0.35
0.37
0.40
0.42
10 Insurance premiums
0.04
0.04
0.40
0.74
0.87
1.02
1.19
1.48
1.83
2.35
2.91
Table C-2 (continued)
1 Total deductions
22.08
24.19
26.27
28.31
30.18
32.43
34.32
36.35
38.53
40.23
2 Direct taxes
15.83
17.12
18.36
19.63
20.76
22.07
23.16
24.51
25.50
26.60
3 Personal income tax
14.57
15.81
16.99
18.22
19.32
20.60
21.66
22.95
-
-
4 Agricultural tax
0.30
0.29
0.29
0.28
0.28
0.27
0.26
0.26
-
-
5 Bachelor and small family tax
0.96
1.02
1.08
1.13
1.16
1.20
1.24
1.30
-
-
6 Local taxes
0.24
0.24
0.25
0.26
0.28
0.28
0.29
0.29
0.30
0.31
7 State loans
0.38
0.44
0.56
0.60
0.60
0.60
0.70
0.60
0.40
0.10
8 Trade union dues
1.63
1.75
1.85
1.98
2.06
2.30
2.45
2.59
2.65
2.79
9 Party membership dues
0.44
0.46
0.49
0.52
0.54
0.59
0.61
0.65
0.68
0.72
10 Insurance premiums
3.56
4.18
4.76
5.32
5.94
6.59
7.11
7.71
9.00
9.71
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Confidential
Sources and Methodology for Table C-2 are as
follows:
1 Total deductions:
a All years-sum of lines 2, 6, 7, 8, 9, and 10.
2 Direct taxes:
a 1950, 1955, 1960-Gosudarstvennyy byudzhet
SSSR i byudzhety soyuznykh respublik, Moscow,
1966, (hereafter Gos. byud., 1966), p. 11.
b 1965-70-Gosudarstvennyy byudzhet SSSR i
byudzhety soyuznykh respublik, 1966-70 gg.,
(hereafter Gos. byud., 1972) Moscow, 1972, p. 12.
c 1971-75-Gosudarstvennyy byudzhet SSSR i
byudzhety soyuznykh respublik 1971-75 gg., (here-
after Gos. byud., 1976), Moscow, 1976, p. 9.
d 1976-80-Gosudarstvennyy byudzet SSSR i
byudzhety soyuznykh respublik 1976-80 gg., Mos-
cow, 1982, p.11.
a 1950, 1955, 1960, 1965-70-sources a and b of 2
above.
b 1971-75-source c of 2 above.
c 1976-80-source d of 2 above.
4 Agricultural tax:
a 1950, 1955, 1960, 1965-70-sources a and b of 2
above.
b 1971-75-source c of 2 above.
c 1976-80-source d of 2 above.
5 Bachelor and small-family tax:
a 1950, 1955, 1960, 1965-70-sources a and b of 2
above.
b 1971-75-source c of 2 above.
c 1976-80-source d of 2 above.
6 Local taxes:
It is assumed that half of local taxes paid for state
fees, building taxes and land rents, and one-time
collections at collective farm markets are paid by
individuals. In addition, local taxes include an "ad-
mission tax" paid solely by institutions (US Bureau of
the Census, The Soviet Financial System: Structure,
Operation, and Statistics, Washington, 1968, p. 127-
28).
a 1950, 1955, 1960-Gos. byud., 1966, p. 70, re-
duced by value of "admissions tax" from Gos.
byud., 1966, p. 70, and half the value of taxes paid
on the three categories listed below.
b 1965-70-Gos. byud., 1972, p. 77, reduced by
value of "admission tax" from Mestnyye byudzhety
SSSR, Moscow, 1970, p. 11. "Admission taxes"
assumed to grow by 3 percent in 1969. Since 1969,
"admission taxes" are assumed to be the residual-
total local taxes less the sum of state fees and
building tax and land rent.
c 1971-75-Gos. byud., 1976, p. 74.
d 1976-82-estimated.
7 State loans:
a 1950, 1955, 1960-Gos. byud., 1966, p. 11. In-
cludes compulsory bond purchases of 2.6 billion
rubles in 1950 and 3.0 billion rubles in 1955.
b 1965-70-Gos. byud., 1972, p. 12.
c 1971-75-Gos. byud., 1976, p. 9.
d 1976-82-N. Kh. 1980, p. 522, N. Kh. 82, p. 520.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Trade union dues are the product of trade union
membership and 1 percent of the average annual
wage. The rate is found in Spravochnik profsoyuz-
nogo rabotnika, 1979, Moscow, 1979, p. 387. The
average annual wage is derived by adjusting the
average monthly wage, found in N. Kh., to an annual
basis. Data on trade union membership are scattered
but available for several years. Membership is estab-
lished for 1949, 1954, 1959, and 1963 in Emily C.
Brown, Soviet Trade Unions and Labor Relations,
Harvard, 1966, p. 48. Membership for 1967 and
1971 is given in Sovetskoye profsoyuzy, estimated on
the basis of percentage of state labor force belonging
to the trade unions or by percentage increases in the
state labor force. State labor force data are found in
N. Kh. 1974, p. 549. Membership for 1976 is given in
Sovetskoye profsoyuzy, No. 22, 1976, p. 2. Member-
ship for 1977 is given in Ekonomicheskaya gazeta,
No. 12, 1977, p. 24. Membership for mid-1979 is
given as 125 million in Moscow Domestic Service, 28
June 79; membership for 1978 is assumed to be 120
million. Membership for 1 January 1980 is given as
127.3 million (Politicheskoe samoobrazovaniye, No.
1, 1981 and as 128 million in Ekonomicheskaya
gazeta, No. 36, 1980; averaging the two yields 127.9
million. The figure of 128 million is used for 1981.
Partinaya zhizn'No. 14, 1982 gives a figure of 131.2
million for 1982.
9 Party membership dues:
Party membership dues are the product of average
annual party membership (estimated as of 1 July) and
1.5 percent of the estimated average annual wage of
party members. Party membership is from Spravoch-
nik partiinogo rabotnika, Moscow, 1978, p. 367. For
1978, from Ezhegodnik Bol'shaya sovetskaya entsik-
lopediya, 1978, p. 12; for 1979, Pravda Ukrainy, Feb
24, 1979; for 1980, Moscow Domestic Service, 1 Sep
1980; for 1981, Ekonomicheskaya gazeta, No. 16,
1981, p. 13. For 1982, see Partinaya zhizn', No. 15,
1983. The average annual wage of party members is
estimated to be 25 percent above the average for all
state employees. The dues rate of 1.5 percent of wages
is found in Ustav kommunisticheskoy partiy Sovets-
kovo Soyuza, 1964, p. 385.
a 1950, 1955-50 lyet sovetskikhfinansov, 1967,
pp. 347-348.
b 1960, 1965, 1970, 1975-76-Den'gi i kredit, No. 2,
1978, p.41.
c 1966, 1969-Interpolated.
d 1967, 1968, 1972-Finansy SSSR, No. 4, 1973,
p. 8.
e 1971-Finansy SSSR, No. 4, 1972, p. 4.
f 1973-Finansy SSSR, No. 4, 1974, p. 14.
1974-Finansy SSSR, No. 6, 1975, p. 59.
h 1975-Den'gi i kredit, No. 2, 1978, p. 41.
i 1976-Den'gi i kredit, No. 2, 1978, p. 41.
j 1977-Finansy SSSR, No. 9, 1978, p. 3 gives
voluntary insurance payments. It is estimated that
these payments constitute 92 percent of total insur-
ance payments by the population.
k 1978-Finansy SSSR, No. 8, 1979, gives voluntary
insurance payments, assumed to be 92 percent of
total insurance payments by the population.
1 1979-estimated by netting out premiums for 1976,
1977, 1978, and 1980 from total premiums, paid for
the 1976-1980 period, derived from information in
Finansy SSSR, No. 10, 1981, p. 6 that voluntary
insurance premiums for the 1976-80 period was 30
billion rubles. It is estimated that voluntary insur-
ance premiums constituted 92 percent of the total in
1980-Finansy SSSR, No. 10, 1981, p. 6 gives
voluntary insurance premiums, assumed to be 92
percent of total. 1981-82 estimated.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Table C-3
USSR: Estimates of Personal Disposable Money Income, 1950-82
Total
Personal
Deductions
From Personal
Personal
Disposable
Per Capita
Personal
Real Per Capita Disposable Money
Income (1970 Prices) (5)
Money
Income (1)
(billion rubles)
Money
Income (2)
(billion rubles)
Money
Income (3)
(billion
rubles)
Disposable
Money
Income (4)
(rubles)
Deflated By
Soviet Official
Price Index (a)
Deflated By
"Alternative"
Implicit Index (b)
1950
45.42
6.92
38.50
213.77
166.07
219.16
1955
62.55
8.77
53.78
274.11
277.22
320.13
1960
84.64
6.90
77.74
362.76
364.58
404.41
1965
122.78
9.89
112.89
488.91
486.48
506.12
1966
133.64
10.95
122.69
525.44
527.02
540.58
1967
143.98
12.03
131.95
559.11
560.79
569.36
1968
159.28
13.69
145.59
610.70
612.53
620.63
1969
169.48
15.26
154.22
640.98
641.62
648.77
1970
182.19
16.97
165.22
680.48
680.48
680.48
1971
193.83
18.45
175.38
715.54
716.26
701.51
1972
206.15
20.22
185.93
751.23
752.74
710.72
1973
218.56
22.08
196.48
786.55
787.34
737.85
1974
234.42
24.19
210.23
833.92
836.42
772.86
1975
249.01
26.27
222.74
875.21
874.34
797.09
1976
264.60
28.31
236.29
920.13
918.29
826.71
1977
276.14
30.18
245.96
949.65
943.99
844.88
1978
291.09
32.43
258.66
989.90
976.23
867.57
1979
303.14
34.32
268.82
1,020.58
993.75
877.54
1980
320.30
36.35
283.95
1,069.49
1,030.34
897.98
1981
333.67
38.53
295.14
1,102.50
1,051.00
897.07
1982
348.17
40.23
307.94
1,140.94
1,049.62
896.26
Sources and methodology for Table C-3 are as 4 Personal disposable money income is converted to a
follows: per-capita basis using midyear population from US
Department of Commerce, Bureau of Economic
1 Total personal money income: Analysis, Foreign Demographic Division.
a All years-table C-1 in appendix C.
2 Deductions from personal money income:
a All years-table C-2 in appendix C.
3 Personal disposable money income:
a All years-column 1 less column 2.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
5 Real per capita disposable money income:
All years-column 4 deflated by an index of prices
paid by consumers for goods. The deflator is a
weighted index based on the official retail price
index (for example, N. Kh. 1977, p. 469) and a
collective farm market price index derived from N.
Kh. 1977, p. 452. For a complete methodology of
the latter, see "The ACES Bulletin," Spring 1979.
The weights are the respective shares of total sales
in 1970 from N. Kh. 1976, p. 531.
All years-column 4 deflated by the "alternative"
implicit price index, which is calculated by dividing
Soviet-reported retail sales plus CFM sales in cur-
rent rubles by the value of total estimated consump-
tion of goods less the value of consumption in-kind,
both in constant 1970 prices. Consumption-in-kind
was calculated by Constance Krueger for bench-
mark years 1950, 1955, 1960, 1966, 1970, 1974,
and by Barbara Severin for 1976 and 1980. Other
years were interpolated geometrically on the basis
of the trend in the share of consumption-in-kind in
total consumption of food, 1975-79 extended at the
1976 level.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Appendix D
In seeking to preserve work incentives in the face of
slowing growth in consumption, the authorities pay
particular attention to the rise in incomes of the
population in relation to planned production of con-
sumer goods and services. Per capita disposable in-
come (what each individual has left to spend after
taxes and other largely obligatory deductions are
netted out) has more than doubled since 1965 (see
table D-1). The growth in incomes has slowed in
recent years, however, as planners reduced the growth
of wages and transfer payments in response to slowing
growth in availability of consumer goods.
Increments in wages and transfer payments-the two
largest components of income-have slowed much as
planned (see table D-3). With some increases in retail
prices, the rise in real incomes has decelerated even
more; real incomes stagnated in 1981-82 (see table
D-4). The rise in the wage bill should continue to slow
during the 1981-85 Plan period, as increments to the
labor force drop sharply and as average wages contin-
ue on a path of declining growth. Planned wage
increases for wage and salary workers (2.7 percent)
and collective farmers (3.7 percent) in the present five-
year plan are the lowest ever in the post-Khrushchev
era, and the 1981 and 1982 results were within the
The traditional Soviet policy of trying to keep wage
increases within the bounds of labor productivity
gains led planners in the same direction in the late
1970s (table D-2). To maintain work incentives in the
face of slowing wage growth, Moscow has relied
increasingly upon more narrowly based incentive pay-
ments in an effort to tie labor effort more closely to
specific results. In addition to the bonus fund estab-
lished in every enterprise, there are more than 30
supplementary bonus funds for special purposes. In-
centive payments comprise a growing share of wage
payments. The Soviet press reported that 19 percent
of payments to industrial labor in 1979 was in the
form of various bonuses and awards paid out of either
the wage fund, the material incentive funds, or special
source funds, compared with 16 percent in 1973 and 9
percent in 1965. If extra payments for piece rate work
were included, the figures would be higher. To im-
prove incentives and stem rural outmigration, the
authorities have promoted relatively more rapid
growth for collective farm members than for state
wage and salary workers. This policy-which is to be
continued-has brought average wages of collective
farmers from about 50 percent of the average wage
and salary worker's earnings in 1965 to more than 70
percent in 1982.
five-year plan targets.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Table D-1
USSR: Trends in Per Capita Personal Money Incomes,
Average Money Wages, and Transfer Payments, 1965-82
Year
Per Capita
Disposable
Money
Incomes a
Average Per Capita
Money Wages b Transfer Payments
1965
489
1,052
65
1970
680
1,376
99
1975
875
1,666
149
1976
920
1,738
159
1977
950
1,791
165
1978
990
1,849
173
1979
1,021
1,894
181
1980
1,069
1,967
193
1981
1,102
2,008
204
1982
1,141
2,069
215
a Column 4 from table C-3, appendix C.
b Weighted average of wage and salary workers and collective
farmers.
Includes pensions and welfare payments, stipends to students, and
insurance indemnities.
d Calculated from unrounded numbers.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
i-onnaennai
Table D-2
USSR: Average Annual Growth
of Labor Productivity in Agriculture
and Industry, 1966-80
Chemicals
7.6
8.2
4.2
3.8
6.3
2.2
Wood, pulp, and paper
5.3
5.3
1.8
2.5
3.1
0.1
Construction materials
5.6
5.7
1.1
2.3
4.0
0.3
Light industry
5.8
4.2
3.0
3.7
2.6
2.0
For CIA figures, "An Index of Industrial Production in the USSR"
and "An Index of Agricultural Production in the USSR"-both in
USSR: Measures of Economic Growth and Development, 1950-80.
Studies Prepared for the Use of the Joint Economic Committee,
Congress of the United States, Washington, D.C. Soviet measures
of industrial labor productivity growth are generally higher than
Western measures because Soviet measures of gross output (in so-
called "constant prices") are biased upward by double-counting and
disguised inflation resulting from new product pricing practices
which leads to increases in nominal prices for "new" products
(usually moderate to slight modifications in current models) in
excess of the increase in cost of production.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified-in. Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Table D-3
USSR: Planned and Actual Growth
in Average Wages and Social Welfare Benefits a
1966-82 and Plan 1981-85
Average Wages
for Wage and
Salary Workers
Average Payments
to Collective
Farmers
Total
Social Welfare
Benefit Funds
Planned
Growth
Actual
Growth
Planned
Growth
Actual
Growth
Planned
Growth
Actual
Growth
Of which:
Actual Growth in
Transfer Payments
1966-70
3.7
4.8
6.6
7.9
7.0
8.8
9.9
1971-75
3.9
3.6
5.8
4.2
7.0
7.1
9.6
1976-80
3.2
3.0
4.7
5.2
5.4
5.4
6.2
1981
1.8
2.1
4.1
3.0
4.3
4.3
5.5
1982
2.6
2.8
NA
4.0
4.2
4.8
NA
Plan 1981-85
2.7
-
3.7
-
4.2
-
-
a Wage figures are per employee. Social welfare benefit figures
refer to the total fund, which includes both monetary and nonmone-
tary benefits. Transfer payments grew faster than other social
welfare benefits, and the share of transfer payments in social
welfare funds approached 50 percent in 1981.
Confidential 44
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
Table D-4
USSR: Trends in Real Per Capita
Disposable Money Incomes, 1965-81
Incomes Deflated Index of Real
to 1970 Price Base a Incomes
Average Annual
Percentage
(1970=100)b
Increase in Real
Incomes c
Year
Rubles
Year
Index
Year
Increase
1965
506
1965
74
1966-70
6.1
1970
680
1970
100
1971-75
3.2
1975
797
1975
117
1976
3.7
1976
827
1976
122
1977
2.2
1977
845
1977
124
1978
2.7
From table C-3, column 5 b, appendix C.
b Differences in the composition of the consumption (figure 1) and
money income measures account for most of the difference in their
growth rates. The measure of personal consumption includes con-
sumption of both home-produced and state-supplied goods and
services as well as purchased goods and services. The income
measure includes not only money spent but savings.
Calculated from unrounded numbers.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4
%,uniiueniiai
Declassified in Part - Sanitized Copy Approved for Release 2012/01/26: CIA-RDP84T00926R000200070002-4