THE SOVIET ECONOMIC PLAN AND PROSPECTS FOR 1971-75

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700010046-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 38
• Document Creation Date: December 22, 2016
• Document Release Date: January 28, 2010
• Sequence Number: 46
• Publication Date: June 1, 1971
• Content Type: IM

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071,96-
Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
T&' Soviet Economic Plan and Prospects for 1971-75
Secret
ER IM 71.95
June 1971
Co p y N2'52
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WARNING
This doctunent contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended,
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
E*c uded Irom outomolit
Jownnrodbnp onJ
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Throughout this memorandum, the aggrega+.ive statistics or in-
dexes which are presented are for the most part those calculated
by CIA and accepted by the intelligence community. These measures
do not agree with the official Soviet aggregate measures of growth
in the economy (including growth of national income and of indus-
trial and agricultural output). Moreover, some official commodity data
such as those relating to grain production have been adjusted to
conform to international standards of definition and coverage. Sub-
stitute measures constructed by CIA economists and other Western
economists almost invariably indicate that there are substantial de-
grees of overstateme-at in the Soviet measures.
All aggregate measures used in this memorandum are computed
in 1968 prices. Previously, 1960 prices were used in computing CIA
indexes of Soviet economic performance.
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CONTENTS
introduction Page
.......................................................... 1
Summary and Conclusions ...... . ...................................... 2
Discussion ........................................................... 4
Economic Plans and Policies . , ..... 4
Background .................................................... 4
Policies Reflected in the New Plan .................................. 8
Investment Outlook ......................................... 10
Priorities in Resource Allocation .................................... 11
Industry ......................................................... 13
Chemicals ........................................................ 13
Metals ......................................................... 18
Fuels ............................................................ 16
Electric Power ................................................... 17
Machinery ....................................................... 18
Agriculture ......................................................... 18
Consumer Welfare .................................................. 22
Private Activity .................................................... 28
Manpower ......................................................... 28
Economic Reform ................................................... 29
Foreign Trade ...................................................... 31
Outlook ........................................................... 32
TABLES
1. USSR: Average Annual Rates of Growth of Components of Gross
Page
National Product, at Factor Cost ............ . .... . .............. 5
2. USSR: Indexes of Output, Inputs, and Factor Productivity in Gross
National Product ............................................... 8
3. USSR: Distribution of Gross National Product, by End Use at Factor
Cost .......................................................... 9
4. USSR: Average Annual Rates of Economic Growth .................. 10
5. USSR: Average Annual Rates of Growth of Gross Fixed Investment
in Consumer-Oriented and Growth-Oriented Sectors of the Economy 11
8. USSR: Average Annual Rates of Growth in Industrial Production ...... 13
7. USSR: Average Annual Rates of Growth in Output of Important
Industrial Products ............................................. 15
8. USSR: Indexes of Output, Inputs, and Factor Productivity in Agri-
culture ........................................................ 19
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Page
9. USSR: Average Annual Rates of Growth of Sa1m:ted In
uts i
p
n
Agriculture ......
......
20
10.
USSR: Annual Average Output of Important Agricultural Products
20
11.
2
USSR: Gross Additions to the Stock of Irrigated and Drained Land .....
21
,
1
USSR: Average Annual Rates of Growth of Consumption, by Component .
23
13.
USSR: Average Annual Rates of Growth of Wages per Worker .........
25
14.
USSR: Personal Money Incomes and Expenditures
25
15.
. ...... .
USSR: Scheduled Welfare Measures .
CHARTS
Page
Figure 1. USSR: Selected Indicators of Economic Performance ........... 6
Figure 2. USSR: GNP, Inputs, and Factor Productivity ................ . . 7
Figure 3. USSR: Growth in Major Sectors of Industrial Production ........ 14
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
June 1971
INTELLIGENCE MEMORANDUM
The Soviet Economic Plan and
Prospects for 1971-75
INTRODUCTION
1. The directives approved by the 24th Party Congress for drafting of the
Ninth Five-Year Plan, covering the period 1971-75, were published on 11 April.
As with earlier plans, there were no important substantive differences between
the approved draft and the earlier version of the directives released in mid-
February for "discussion" purposes. On the basis of the approved directives,
the Council of Ministers is instructed by the Party to draw up before 1 August
the annual plans for the individual years of the five-year period and the plans
for each of the 53 ministries and for the 15 republics. Finally, by 1 September
the detailed draft of the plan is to be submitted for ratification by both the
Supreme Soviet and a Party plenum. If past procedures are followed, however,
no public proclamation will be issued concerning the plan's formal approval
nor will a summarized or expanded form of the detailed plan be published.'
2. This memorandum reviews the economy's performance in 1966-70, the
policies and plans for 1971-75, and the prospects for achieving the principal
goals. Recent trends in output and its uses and the plan's highlights with respect
to priorities and primary targets are described. Production goals for industry
and agriculture and allocational plans for consumption are discussed in detail,
and attention is focused on probable trends in selected areas that (1) will either
directly impinge on the success in fulfilling production targets-private activity
and manpower-or, (2) are indirectly related to the extent that they affect pro-
ductivity (efficiency) gains-economic reform and foreign trade. Finally, the
memorandum presents a preliminary appraisal of the prospects for the Soviet
economy in the period 1971-75.
*In his concluding speech to the 23rd Party Congress in April 1966, Premier Kosygin stated
that within four to five months the planning authorities would have the detailed plan for
1966-70 ready for submission to the USSR Supreme Soviet. However, two sessions of the
Supreme Soviet passed-in August and December 1966-without a public announcement of
a final plan.
Note: This memorandum was prepared by the Office of Economic Research.
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SUMMARY AND CONCLUSIONS
3. The year 1970 marked the end of the Eighth Five-Year Plan (1968-70) and
the sixth year of the Brezhnev regime. Although the economy during this period
failed to regain the high growth rates of the 1950s, there was moderate im-
provement when compared with the latter years of Khrushehev's regime. Gross
national product (GNP) grew at an annual rate of 5Y2% compared with about
5% in 1961-65. While much of this modest gain was attributable to better
harvests, resulting from more favorable weather, the post-Khrushchev leader-
ship can take credit for some of the improvement. In contrast to the disruptive
nature of Khrushchev's approach to economic management-characterized by
frequent reorganizations and campaigns-the new regime has proceeded in a
more orderly fashion.
4. The economic blueprint of the new five-year plan (1971-75) does not call
for a radical shift either in production or allocational policies. The average
annual rates of increase planned for GNP and industry are somewhat above
the average annual growth achieved in 1966-70, as shown in the following
tabulation:
Average Annual Increase (Percent)
Actual Actual Planned
1961-65 1906-70 1971-75
Total output (GNP) ........................ 5 51/2 6
Industrial output ......................... 7 7 8
Agricultural output ......................... 3%h 4 3%
5. Although the now output targets for 1975 are relatively modest, the pros-
pects for fulfillment are not auspicious. The projected rates of growth of man-
hours and the stock of plant and equipment are somewhat less than during the
last half of the 1960s. Total investment is to increase 6%% annually, compared
with more than 7% annually during 1966-70. Labor inputs will probably in-
crease at no more than 1%% annually, reflecting a moderate slowdown over
the rate of increase in the 1960s. This pattern of growth in resources implies an
average annual rate of increase of total inputs of around 3%, compared with
3Y2% during the preceding five years. Thus, to achieve even the moderate
improvement planned in overall growth, there must be a substantial increase
in factor productivity.
6. On the basis of past experience, however, there is little reason to believe
that factor productivity will grow much faster than the annual rate of roughly
2% registered in 1966-70. This rate of growth in output per unit of input,
combined with a 3% growth of resources, would result in an average annual
rate of growth in GNP of 5%. Obtaining a higher rate of productivity growth
would probably require the adoption of new strategies for the introduction of
new technology and for raising the efficiency of investment in industry and
agriculture. However, no new organizational or managerial schemes have been
revealed to bring this about, suggesting that old, unproductive methods will
be tried anew.
7. There is no evidence of major changes in priorities in the interplay of the
demands for increases in all major sectors-military and space, growth and
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consumption. As before, investment is to grow at a slightly higher annual rate
OW than GNP and consumption at a lower rate (5%). The data do
not permit precise estimates of defense outlays, but it appears that the plan
allows for a rise in expenditures for military and space programs at ' least as
rapidly as that for national income.
8. The plan directives place unusual emphasis on bettering the lot of the
consumer, but the figures given imply that the rate of progress planned for
the standard of living is somewhat lower than that achieved in 1966-70. Never-
theless, there are signs that consumption and consumer-related sectors such as
agriculture may now be on a more equal footing with other claimants. In other
words, in the coming years, if the economy fails to grow at expected rates,
resulting in an overcommitment of resources, it may be that the consumer in-
dustries will suffer no more than the growth-oriented industries. If this occurs,
it will mark a major turning point in Soviet economic policy.
9. Achievement of the targeted rate of increase in per capita consumption
(4%) should meet the population's 9xpeetation of steady and visible progress.
There is little prospect, however, of a significant reduction of the chronic
irritations to consumers such as suppressed inflation, incomprehensible shortages,
queues, distorted prices, poor quality, and neglect of consumer preferences.
These are matters that growing resource availability has failed to solve.
10. From the point of view of the consumer, probably the most important
element in the consumer welfare picture is the rate of improvement in his diet.
And, of course, progress in agr:.:ulture is the key to meeting this demand for
higher quality food. At first glance, the agricultural goals for 1971-75 appear only
moderately ambitious-the average annual rate of growth would have to in-
crease by slightly less than the rate of expansion recorded in the 1966-70 period.
The growth rate recorded in the earlier period, however, was based on a very
unfavorable weather year (1965) and ended in a generally favorable year (1970),
while the current goal begins on the high plateau of 1970. As a result, under
normal growing conditions in the period ahead, a moderate acceleration in
growth is required to match the earlier period. The evidence pertaining to
resource plans, although incomplete, indicates a boost in the growth of annual
inputs to farms in 1971-75. Indeed, if Brezhnev's rhetoric has content, the am-
bitious plans for investment .and industrial support to agriculture will be carried
out with unprecedented persistence. Moreover, there are signs of more tolerance
by the regime toward private farming activity. The relaxation of restraints on
the private sector taken together with the high priority position for resource
allocations to collective and state farms in the socialized sector should provide
a masked impetus to farm output in the next two or three years.
11. Even though the announced plans for foreign trade indicate a' slowing
of the rate of growth of total trade turnover, the outlook is for the USSR to
continue to use foreign trade as a means of alleviating some of the strains in
its economy, especially through the import of capital goods from the industrial
West. As before, the principal constraint to expanded trade will be the growing
indebtedness to Western trading partners and the problem of generating off-
setting exports.
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DISCUSSION
ECONOMIC PLANS AND POLICIES
Background
12. During the Eighth Five-Year Plan (1966-70), Soviet GNP grew at an
annual rate of 5%% (see Table 1 and Figure 1). By comparison the rate posted
in 1961-65 was about 5% and for the decade of the 1950s about 8%. Because
of the wide :!actuation in agricultural production, however, year-to-year growth
in GNP has varied considerably during the past five years-from a low of 2.5%
in 1989 to a high of 7.9% in 1970. All of the increase in the growth rate of GNP
since 1965 can be attributed to an improved performance in agriculture and
construction. Industry, the largest contributing sector to GNP, grew at about
the same pace as in the first half of the decade. The rate of growth of Soviet
GNP for the past five years was less than half that of Japan, roughly the same
as that of France and Italy, but substantially above that of the United States,
West Germany, and Great Britain..
13. The modest improvement in the rate of growth of Soviet GNP in the
last half of the decade was due entirely to a boost iti the rate of increase of
factor productivity (output per unit of combined inputs of capital and labor):
from an average of 1.3% to 2.1%. The rate of growth of inputs of capital* and
labor in this period was about the same as in 1961-65. (These data are presented
in Figure 2 and Tab'e 2.)
14. The moderate upturn in overall growth in 1966-70 was reflected in an
increased tempo in allocations to all the principal resource claimants (consump-
tion, investment, and defense) in comparison with 1961-65. As in the past, out-
lays for investment continued to grow at a somewhat higher rate than GNP and
outlays for defense and consumption at a somewhat lower rate. These moderately
diverging trends led to a further increase in the share of GNP allocated to
investment-from 29% in 1985 to 31% in 1970-and a small decline in the
share of defense expenditures-from 7%% in 1965 to 7% in 1970 (see Table 3).
15. The share going to consumption, the largest GNP claimant, decreased
slightly, continuing its long, slow trend downward. Although declining as a
share of GNP, the rate of progress for consumption for the 1968-70 period was
greater than for either of the previous two five-year periods (19,8-60 and
1961-65). Moreover, the share of consumer-oriented investment rose somewhat
more rapidly than that of growth-oriented investment when compared with
1961-65.** This modest shift was designed to compensate partially for the neglect
of housing and consumer goods production during 1961-65, when relatively
greater emphasis was placed on increasing investment in the growth-oriented
sectors of the economy (primarily heavy industry, transportation, and com-
munications).
?Unless otherwise noted, the term capital is used to designate all structures, aquipment,
land, and livestock' but does not include inventories.
??Consumer-oriented investment includes investment in agriculture, light and food industry,
housing, and scrvlces.
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Table 1
USSR: Average Annual Rates of Growth of Components of Gross National Product, at Factor Cost a
1961-65 1969-70 1966 1967 1988
1969
1970
C
ti
l
ross na
ona
product ................................................... 52 5.6 7.0 4.4 6.2
I .
I
d
2:5
7
9
n
ustry
....................... .....................................
7.0 7
0 7
7 7
.
.
.
.6 6.6
Construction .. .........
.
6.5
6.8
..................
.... ...........
3.8 8.8 7.3 8.1 7.1
i
A
l
`
2
0
9
8
gr
cu
ture
.................... .
Transportation
2.6 3.7 8.5 -2.8 5.7
.
-6.0
.
14.1
.............
..........................................
Comm
i
ti
8.7 6.0 4.8 8.5 6.0
4.1
8
5
N
un
ca
ons ........... ...........................................
t )mestic trade
8.2 10.5 10.8 12.2 9.8
9.9
.
9.9
M
. . . . . . . . . . . . . . . . . . . . . . ...........
S
i
5.7 8.2 8.6 9.2 8.4
7.4
7
4
en
erv
ces ..............................................................
Nonagricultural sect
f
?
5.2 4.3 4.4 4.6 5.1
4.1
.
3.5
-i
ors o
gross national product
............................
6.2 6.2 6.6 8.9 8.3
5.3
8.1
? All aggregate measures used in this memorandum are computed in 1968 prices. Previously, 1960 prices were used in computing indexes of Soviet economic
performance.
T hei for industrial and agricultural
to output presented in this table are ad{usted to a value-added basis by deducting: (1) sales by agriculture to industry
frduarial tput, and (2) sales industry agriculture from agricultural output. The indexes of industrial and agricultural output shown elsewhere in
this memorandum represent value of output, so the values on which they are based do not exclude purchases from other sectors.
The weighted average of the annual change of output of all the sectors, excluding agriculture.
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Figure 1
USSR: Selected Indicators of Economic Performance
Gross 1981-65
National 66-70
Product 71-75
PRODUCING SECTORS
1961-65
Agricultural 66.70
Production
71-75
Industrial
68-70
Production
71.75
PRINCIPAL CLAIMANTS
1961-65
Consumption 66-70
(per capita)
511909 5-71 CIA
(Aveage Annual Rate of Worth in Percent)
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Gross
National
Product
Actual average
annual increase
USSR: GNP, Inputs and Factor Pnxluctiviiy
(Average Annual Rate of Growth in Percent)
Inputs of Capital
and Labor Combined
1961-65
66-70
71-75
1961-65
66-70
71-75
1961-65
Productivitj of Capital
and Labor Combined 66-70
Planned overage
annual increase
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Table 2
USSR: Indexes of Output, Inputs, and Factor Productivity in Gross
National Product
1960
1965
1900
1967
1968
1909
1970
1975 Plan
Total inputs' ..........
83.0
100
103.5
107.0
110.6
114.4
418.4
138.3
Man-hours worked ...
b
91.2
100
101.8
103.7
105.5
107.6
109.0
118.6
Capital
.. ? ? .. , , . ? , .
60.1
100
107.9
115.7
124.2
133.5
143.8
202.2
Land .. . ..... . . .. .
97.1
100
98.9
98.9
99.0
99.7
98.7
98.7
Output ...............
77.7
100
107.0
111.7
118.6
121.6
131.3
173.7
Factor productivity' ....
93.0
100
103.4
104.4
107.3
100.3
110.8
125.7
Average Annual Rates of Growth (Percent)
1956-60 1961-65
1900-70
1971-75
Total Inputs ....................
2.8
3.8
3.4
3.1
Output ........................
5.7
5.2
5.0
5.8
Factor productivity ..............
3.0
1,3
2,1
2.5
' This index gives a measure of the level of output expected to be obtained from the indicated
levels of conventional inputs of labor (expressed in man-hours worked), capital, and land,
The three series of inputs are combined (using a Cobb-Douglas production function) by use
of 1908 weights that represent the monetary or 'mputed costs attributed to each of the inputs.
The shares of inputs in total costs of production in the base year 1968 were as follows (in
percent): labor 88.8; capital, 29.9; and land 3.5.
=Gross fixed capital including livestock.
' Ratio of index of output to index of inputs.
Policies Reflected in the New Plan
16. The new five-year as initially outlined in the draft directives and
in the speeches at the 24,;1 Party Congress, suggests that the main objectives
of Soviet economic policy will remain roughly the same as in recent years.
17. The targets for rates of change in output by the major sectors and in
use of resources are shown in Table 4. The average annual rates of increase
planned for GNP and industry are somewhat above the average annual growth
achieved in 1966-70. No major shifts are apparent in the allocation of resources
among the principal claimants-defense, investment, and consumption. As before,
investment is to grow at a slightly higher annual rate (6%%) than GNP,
and consumption at a lower rate (5%). The directives place unusual emphasis
on bettering the lot of the consumer, but the figures given imply that the rate
of progress planned for the standard of living is somewhat lower than that
achieved in 1966-70. Although the available data do not permit precise esti-
mates of defense outlays, it appears that the plan allows for a rise in expenditures
for military and space programs at least as rapidly as that for national income.
18. The Soviet leaders continue to call for (1) increasing productivity (by
uncovering "hidden reserves," accelerating the pace of technological progress,
and improving managerial techniques and incentive arrangements); (2) in-
creasing the quantity of goods and services for all principal c:aimants; and (3)
improving the quality, durability, and reliability of producer and consumer goods.
19. Indeed, to achieve even the modest improvement planned in overall
growth, the regime must depend upon a substantial increase in productivity.
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USSR: Distribution of Gross National Product, by End Use at Factor Cost ?
1965
1968
1969
1970
End Use
Billion Rubles b
Percent
Billion Rubles b
Percent
Billion Rubles b
Percent
Billion Rubles a
Percent
Billion Rubles b
Percent
Consumption .............
114.1
63.3
136.7
58.9
164.3
59.7
166.9
59.1
176.9
58J-
hivesiment .................
N
48.2
26.7
67.7
29.2
83.3
30.3
87.0
30.8
94.9
31.2
ew fixed ...............
O
h
'
38.8
21.5
52.3
22.5
66.0
24.0
68.2
24.2
743
2A-4
t
er
..................
9.4
5.2
15.4
6.6
17.3
6.3
18.8
6.7
20.7
6.8
Defense ...................
13.9
7.7
17.1
7.4
20.0
7.3
21.0
7.4
21.7
7.1
Administration ............ . .
3.5
1.9
4.2
1.8
5.0
1.8
5.2
1.8
5.4
1.8
Other ? ....................
0.5
0.3
6.4
2.8
2.7
1.0
2.2
0.8
5.7
1.8
Total' ..................
180.2
100.0
232.1
100.0
275.3
100.0
282.3
100.0
304.6
100.0
' Because of rounding, components may not add to totals shown.
b In 1968 prices.
Including capital repair and civilian research arrd development.
? This category is a residual consisting of inventory change, net exports, and a statistical discrepa-ncy. The residual is the difference between total GNP, which
is derived from sector-of-origin data, and GNP as the sum of end uses. See footnote e, below.
? Ruble totals for GNP and corresponding growth rates for GNP represent sector-of-origin totals because these data are more complete and, in some instances,
more reliable than data pertaining to end uses. For example, in calculating GNP by end use, net exports and inventory change cannot be measurzd adequately.
Furthermore GNP by sector of origin and GNP by end use are derived from independent sets of weights and indexes. Hence, a statistical discrepancy can be expected
to exist.
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Table 4
USSR: Average Annual Rates of Economic Growth
Industrial output
7.0
0.8
8.0
Agricultural output
..... . . . . ..... 3.5
3.9
3.7
Investment (gross fixed)
.............. 6.3
7.2
0.5'
Consumption (per capita)
..... . ....... 2.1
4.2
4.0
Defense ..... .................. 4.2
4.0
na.
Cross national product .......1-1-1 5.2
5.0
5.8
The projected rates of growth of man-hours and the stock of plant and equip-
ment are somewhat less than during the last half of the 1900x. The plans for
growth and the clarion call for technological improv':ment, however, are not
backed up by concrete methods whereby the change is to be effected. No now
strategy or new organizational schemes for the introduction of now technology
arc revealed in the plan directives or the Congress speeches.* Moreover, the
current regime has revealed itself to be particularly unimaginative in matters
of innovation, suggesting that old, unproductive methods will be tried anew.
20. Normally, assessment of the directions of the Soviet economy based on
medium-term plans is hazardous because of the preliminary nature of the data
presented in the plans. The unusual paucity of data in the published directives
for this plan added to this uncertainty. The sparseness of data may be associated
with a lack of balance between planned inputs and goals for output, particularly
in the materials and machinery brauchcs of industry. In this sense, the directives
may reflect an effort to cover up a set of goals that would otherwise convey
a pessimistic outlook for Soviet economic growth.
Investment Outlook
21. The published plans are notably uninformative on investment details.
Moreover, Kosygin in his presentation to the Congress failed to elaborate on
the sparse investment data given in the directives, as he did for the 1966-70
plan at the 23rd Party Congress in 1966. This reticence on new capital formation
as well as lack of figures in some other sectors may indicate indecision or even
opposition within the leadership over the planned pattern of resource allocation.
in any case, the limited data that are available do not suggest a major shift
toward consumer-oriented sectors compared with the last five-year plan.
22. In 1966-70, new fixed investment grew at an average annual rate of more
than 7%, or about one percentage point higher than that averaged during the
first half of' the decade (see Table 5). At the same time the growth in total
capital stock declined from an average of about 8%% in 1961-65 to 7%% in
*Chief planner Baybakov, in his remarks to the Party Congress, presented a planned rchedule
of savings of specific material inputs (e.g., metals and electric power) ovecr the five-year periid,
which when aggregated come :o more than 20 billion rubles, an amount equivalent to one-
fourth of the total planned boost in national income between 1970 and 1975.
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'T'able 5
USSAs Average Annual Rates of Growth of Gross Fixed Investment
in Consumer-Oriented and Growth-Oriented Sectors of the I c runny
Total Invostni'nt ..................... (13 7.2 (J'-7
Consumer-oricntod investment .... ... 5.0 7.8 n.a.
Agriculture 11,0 8.8 10'
11 using . .. , .... -0.1 5,0 2'
Cc or goods industry ........ 3,4 14.9 n,n,
Services 7.5 0.3 n.n.
Growth-oriented Investment .......... 7.3 an Heavy Industry ...... . . . .... . . .. 7.5 0.15
'1'rannport and conununications ...... 7.2 4.7 n,n.
Construction .. . .................. 5.1 11.0 5
Based on prelindnari; esthnates for 1070,
Maser on planned growth of iner+tmeni in agriradture, ba^,luxiva of rural housing
and servicni,
' Bused on planned gross comrntssioning.s of unto housing expresred in square tnetera
of living space.
1906-70, partly reflecting a step-up in the rate of withdriaNIi in hram-v imIumv, inrlutlind
dr/ease. nort if t, rlreirk J rn tnrrrinc and radio iwladrie,.
anamni mat the h(riwr groa,th planned l"i light industry than for hs+rry
indtutry (11 trraw A in Soeiet ia- , m) in 1071-75 pen klra r 'i, rnrr of Of ihi/t in mxitmty. In
the maftrs of rrrru-rr adoration at it a//rrta rrr+rurmir m mu'A. this tnt.lltar-wJ ar>iu->rn1 in
ri/rrt mis+ra the mein taw. Thia awy of putting the tmueark?n ob,n.era the lard that heap
indtutry agars rnnnamrr.txirnf .j arrtmv as urll as de/roar awt (nsranwwit for jurdsn srnntdnh.
Although rAa fart has been nnph4rtsed i.w she Becht lnadnxhip. the Amy problem rrw!!y is
Oust Aintia of hrary industry thnuld be emphwat:ed (r.x., for are *ml or at,+kvlturol dwau ds ).
This is not to adv. hou+re+rt. that the Soviet tlrbdtc acre hrmyi nn+us light industry f ors not
hates intermit pwditkm/ implications. ltetiaum of ikr+io aI jwrtwlkra, such is debate has arrv
rod fmportanne in the Soi kf political rnainn n ant.
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INDUSTRY
28. Ilia pac' of growth of hulustrial output Is scheduled to accelerate sonic-
what during 1971-75 to silt average amual rate of increase of about 8%, compared
with the average rata of nearly 7% recorded for 1900.70 (see Table 0). Ilia
overall targeted rate of progress for industry, however, reflects the combination
of it continued slow rate of growth in basic industrial materials and it retnnrkablu
accelerated rate of growth in maeMnery (see Figure :3), iircause the materials
sector provides lsiany basic inputs to the machinery sector, Soviet planners have
trnditionally projected growth rates for the two sectors only one or two per-
centage, points apart. 'I'll(! sharp divergence in the, current plan between these
growth rates (of the materials and machinery sectors) raises doubts about the
statistical basis of the machinery plan. in keeping with the central themes of
the directives, the tasks assigned to industry call for marked increases in pro-
ductivity and an improvement in product quality and assortment.
29. Among the major -actors of inthlstrq, the output of industrial materials
is scheduled to grow only tit about one-half a prrerntage point above the rate.
averaged in 1tX36-70. lint with the excwption of chemicals, construction materials,
m-?d forest products, the planned rates of growth of all industrial material
brt;nches are somewhat lower.
USSM Average Annual Rates of Growth In industrial Production
t'rttrni
101-0
IOM-70
1071- 7 !3 Plan
In Itoi,4al pnxluctir.n
7.t)
a 8
8.0
lnduttria) matrtial,
71
n.2
(f.0
Furls an,) pov-W
7 1
5.7
51
Atrtatt
!;.1
fl '5
rr.8
Foust ettduct' and paper
1.p
4A
m l
GnmtnnIkni matrtialo
8.t1
(3.7
7,0
Ghrmit-alt
l 13
11 7
11.1
tit ac h tnrly
8.2
84
11.0
N m rlutabtr c.memort arxxlt
t 5
(3.2
O,1
Noft ttrxxle
2.4
7.7
0.0
l'rtxvxr. d (axht
7.0
4.0
(3.2
? Stan hearer air In" r f f irisl Code( ltmtt 04iu0 of m.t(wt( d414 rw 4n' begird f ruin
awdal,& ('FY' I Iar'fi. Arfual f t)utrt air from an h+drt of fraltralr5iI pt-xluclinn pr-
l+arrri 1?i, d,u `)f fiev, iirench m*uhte of 1961 w14o fod..r too.
z Mirilsrfnl Pi 14ry e.
? faoni tin (44nnrd pn.u?(h f n- tmpr- aroi f w"WWtr .r,d f mn. ?n r-lreipotalknn r f ()w
#?%IWh of rornrnerriol (pnbrr frr )UM- 710.
Chemicals
30. lbe tnulitionally rapid?grmving rllemiealts :'etor is natal (pr a booxt
averaging about 11',ro a year, altout tw{cr the rate for other material:. The
new plan continues the emplias is of the 19tOtt on hspid expansion of the output
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USSR: aro-.rth In Moor Sectors of Industrte- Production
(A"tW Annwl Role of GtWh M Foment)
Industrld Material:
I0
Machinery
17
Nendwabie Cons M G1nde
r ~-~-
14+. M ..w+ntY,,
Thp "'Of" irf taittrr!iro "'f4ffe Irmo MOV;#%
..txit+rt F+- sCtG ~tth7rP +ni#1 h r>i i.
f*1 et""Or"txhw "M M inpoiy"V 1.
-roto will IP hethrruwo' irw rrrrsv.?:~rrrnrp w?rorosyya.
ISIi2 t gN n wail' rfidlpfiwrtiale wily i+p I++rxirrl.
ThP f-aY tri r1rt-~i-!liry lxti-wl ~.+lirtt a trlasril a-fifnilp lin*attl file lirivatr apt'419 ptr-
dominaffil_
(4) A tr,rt-f ;_lafrfnrt-i in the ultra ii>-$if afeft that ltti(r t rilih .a--af
ipact fns tr)rc/r4) 1-ti,s1nci4 in file ltncim;? frrllfrlWe (Ati, t11atwrf-4 p nn
Nmf~f.t in rffeif, ?ll;r a it tonne elitirmr flint llticie ct>ilingt %Ptr allltlic41
tlx-tarlically dllellg thF ttimntrt of Inc) gawl It O WA only in Mf;,tcinw lmt
alai in cii)lntfive fault ttut)f1t in vatioi-t tifhrt fillet. 1lie ritieirtxr of irrcal
teller rrilings may itrdicate--lxti-alit-_thaf the polity to rt-t mtalttr lifit?alc+
aeti, }iy it nit islv-lrhratlfilly tnlilxrtiril by all riemcrntt of the beadr0 ip.
d;srn f1-o--iil the c?rilingt 41111 (if rffrcl ate w-rll ai.me live lititr tl,+mio ptr?
vailin~ in state sftitrit, thrit t,sitirncr (slut flip inslividnal?t incentive in matkri
ps-xlntr inttn his titivate plfit and may littwnlst him rilhrt in withlinid his
ptrnbur f-i-tn tl-atkrt (it to utility the "hlarl, tnatkrt." On flip mlirt hand,
tr',icatiml of litifr crilingt by trnllrctivr farm matlo it may atttact thr
in-,Jivi-l--al pt,>,lnrrt back to file matkrf.
7(1. ~ixitf rout tltatrgirs W* -6"l ptGvatrly nwnefl lirnttihi; hi4fntits1i)y hr.-'
born lrct f)rsible than the lmiicirt appliml 2n private Aciit?ity in agticillt--tr. It
hat .nwtally been 5ntoltnitet) that in.,ividnsilly built hfvlc.ing can help to rate
honing ptettutrs in tmallil tuJr,..an arras and in offal Meat, but it it not a
trattwlahle to union to Cho ovrialt hrnlting thnttagr. 17 is it a1-prars txitr%vot1%y
that the itnplitsl 11i71 plan goal tot private ,amting (in million sgaare nlrfrts)
it :I44r,> above tine actual 39 0 h%Tl and tome 19% above the average annual
quantity t ti't3mtrtl during 1900.70, Although past perfonntkitve in fulfilling
plan tatgrts for ptivati' homing strongly snggrsts that the achirvenirnt of this
goal it unlikely, some suplxtrting evidence of an improvml climate for individually
csinstnidrd tlwrllinys is provided by the 1#171.7# plan directives. which 'tale
that it is nrcectalty "1n assist individual housing constrludinn." On the other
hand, nion' rricintrAgitig rtittottirmrnt was prmidr d in the 0Oii.70 plan dirrctisTs
which, in addition to announcing the quantity of private housing to be con.
ztnli ttif, ciiiitiiurd a somewhat broader statement to the effect that it was
nmestaty to help workers, employees, and rollectivr farmers to build their
u,,fivitiual hones with their own funds plus the aid of s e rretlit." Although
their was an initial spurt of 5% in 1000, completions derrrased by an average of
nearly annually during the 1007.70 peritxl.
MANPOWER
71. As in ihr past, the directives for 197,11-75, were rrticrr-t on the panned
allocation of labx-r. Considering the. additional manpower nt*ilable in the a irly
1070s and the past history of the growth of labor pnxluctisity,.iowmrr, the output
goals for 1971.75 appear overly ambitious.
72. With Soviet workers only about half as productive as their US counter-
parts, growth of labor productivity has been an Achilles* bed in Soviet economic
development. Shortfalls in the goals for productivity growth in the major sectors
of the economy hive lx--,n a persistent problem. Until the mid?19ODs, however,
deficiencies in labor productivity growth were partly overcome by transferring
faun workers to urban jobs and by bringing housewivt!s and youths into the
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1a1 1t frl#1t`. Tllrtp t nlttc'i havee, l,c.rt- lato-ly r*hatleiovl Otto t1-e -nirl?l t.
Ss/tplot label nn lonArt esitlt in latstr rfnanlilire it" Farms, anal alTIltnKimafoly
E12'?r rd the'e-ons-ag'A pnpnlaiintl have j(-lye r1t altr?t-rf erltq,nl cm a (till belle ltac4 .
It it rttitn?ltrtil that file 1-ighrKf aff.04ah1- tarn ni foo-fh td ll)r 1+dal .rc ir?4 fatmt
11"'f-W, "Al l+p alttntf 1.717" atNnlally tI-+rini? 1471.71. alit hih' his?hrt fhatl tl r tale
trEiurtT4l in l tl?7f1. 1-frttrrnrt, lrrraocr of cttl-c 11tal chine Mithilt ill,- 1a1w.t fc t-rn,
file as'riaste annual talc- of s:trlnih of ini,ll that--l)nlte that' 1W, t+nn(-Uhai lrcs illat-
file We of ittlo"Ih M 11W lalx-t 1hn p anti 01';7' ~ntrt than lhr lair a( hirt'1 c1 thlti!ns;
The 111"fcclitvi five yr',-tt. I"atlrt 14nn il- in 4tr lal,ctt fnftc wrkiltl tmplirc' rliffino
111E sit+ to tha atmet! (hHtr't of trettitling r4stt:1411 nt-al rt1Sl11tfitlnifira tlril?ret of
which tfct11 1i4ly.
(ECONOMIC REFORM
71. II the plan tlifrr.'titr-, and file tent of file pircrntatirme al file 2.4111 ;~atfy
C ttrst ate guitlrt to the trst-mAA plant lot rc~-t-ntnie trfrlt-n, thrtr will h-r
Ott 09nificant now ittitiafivrs tinting 14 71=7i. tirrTttl-rlees, rsllptittr1ilaliot- with
new n-rttltxls of plpnnin(t Phil tnanastrmrt-f will remlintir dittinst the prtitltl.
T%"-F; highly Iruhlicirrd Itmftct*--rttttanitaiinn of rof(Vl+tiera lot(* ?ptinliution at=
si-ciati(n-~" and the ftraliratipt- of lalxtt c.arin~a s?ia lite ?Shchrkinn tnrtluttl--will
i?r, mfairttwl atd fsnseihly r*pantled acctltslinst In sfaermrnts l,l' tiled-nrv, kns)-sfin,
and nlhrrs in the. ratty htrtatchy. ?llle past trhtttancr of crt-tra) anihntitirt In re?
linquith tonttol otrt low rt adminiettatis'e rchrl(mc. howm-cf, tlutftrttt that
such new mrttuxls att+ unlikely in have a st-itstantial rflrtt, one way ov the
oihet. on rlficirti y in the Sm?frt economy dtlting 11371 ,73.
74. IN-wloctkin ass xiatio;ls ate grtulps of rntrtpticre that lite similar ptrxlsoc.
'-ion technology of ls:.nufacture similar Intxiuctc. 'the mrmhrt rt-irrptitrs air
uanally close to each othet grctgraphical;y and a:licial a!rrss it trntrtrtl on the
associations role in getting tetrarch and tirsrk-pmrrst Moll prtxlnction closer
tngtrthrr. [!y rnWrginhs ildt ideal rr?trt-pri .rs into larger otws, the pmpnnrnh of f",
%ocial?:ms hol to alleviate some of the oiler Intl ieot Sovirt rcttlu-mic prob.
irtnt, including a lack All shit daliratitm, an tmcatitlactzry tale of technical pros.
rr+t, rxerssise assts trsnllinst from duplication of manastrtnrnt stnleturr, ins.
mTtlnctmic production in Renal) rnterprisrs, and the Ixlttr duality of intrrmetliatr
gtxxls. Current rtnphasis on production asulriatitms may dorrshatlow an official
decree proclaiming them the standard organisational unit in induttry. h11' timing
of such a crmv.rsitm, itu*th-rr, rrmains obsctarr.
75. The Sinhekino experiment, wherein specified rntrrprikrs cut (heir work
forces while meeting higher production targrts, has beret hailed as a s.icvrss at
many of the enterprises involved. It has also led to worker ditct ntrnt anti the
problem of finding fobs for laid-off workers. Until the experiment is introduced
throughout the economy on a long-term basis, its full impact cannot he assessed.
Its failure to provide an efficient method for trantlerring surplus workers, to
activities when they ure most needed suggests that, like earlier reforms, the
Shchekino experiment will not fundamentally imprnv::t the efficiency of the Soviet
econ,my and will be very cautiously applied, lest urrrnpioymrnt become serious.
70. The new plan directives mention the economic re norm of lb655 only briefly,
noting that the balance of the state sector will finally be transferred to the
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SCCRCT
atlri othr7 (r?nttal r,,ntlonlic itlctifntintlc anll dellattnlrnf; ille thlty Iris owiftol
the cu fixity of the ectabli;hfnwlt in I Allying nut the lradptchiil s dite(llvr;.
. , it i; the (lite t !July of llle Tasty ntttantlati(ut to (iolltol lisp Filg4oilallem
of n?ntk tit the alli+atalo; of she ttlioicity itself, am) the oh etvance of Patty
alt({ ;fate rh;(iplitle
lift. A; (>ilticiian i yorvel of Itaclin 1 ,iilrtty ha; it-(liratril, "oily ;titohlafintl tr-
itniiinA Ill(' i'atfy c'-I atli;yation to (itnntol the i-nl+lrtnrntatioo of i'atiy amt ftnv-
rtnmrnt (litri live; (an (,h!-irlncly tie a!?et(lie(1 lip Covet eta( tic ally rvrty aped
of a gnvrtilment agency'; operation."
$1. A; another ~wlcsible indicator of the Patty's rspan(lrcl tr+lr in the tlit+ci
(;1tltti)l anti nprtafinnal tr;lxmcilre!ity of the rccltulmy litc,hitrv failed to t.lttl,
(lrthn a; he hall At the 191)0 Patty C4mvtrc; the ptac.ti(' ill the Patty of exetci;inn,
''iwtt y folelape' rlvrt r;;lilotnic rclAhli;htnenis, lodreii, a t linlalp lot mote inter-
frtrtice fnlm Patty tltitan; itt r(;ttlotnic tlpcioion ntakitlg tva; r;tahli;het) by a
t;tnoi3lrtahlr vniotttr of ttiliticnt by cprakrt; at thr? (;+-ntttrcc of Invrttltilrnf
rc;momir otgatl; atnl thrit beach, 'tier pattrtn of a titirienl errtno to have bent
41Migtled'11 leave the itnptrs;irnt that the Patty ha; been tloillif it; i(-l- amt that
rtr)tit -mie ptohlems Ate Iatpely the fault of ftnvrtt-tnrnt 1111trail(7A(ir4.
FOREIGN TRADE
112. The new plan c-all; ((it all avrtAgr annual tatr of f?towth in itatle ttlrtlovrt
of aipnitt 0%, the same fair of fttowth sihrillllnd list CNi!' in I9711~75, 1-ut ((ln-
sidrrahly slower than life avrtags' fair of inctraw in ttadr of t+t~% pis;tell In
1!W30- 70.
K1. The USSR tetnuhtrt; mntr than hall of its itatle wii); the r(mnitirc of
l;a;lrttl 111fopr, Mmrovrr, according to the ;rtrehtly v ntwludrel 1171.7 trade
Agrrv turns;, Soviet tratlr with these t.-nnttiro is srhrclulp(1 to r;paml at an
average rate of aixntt 711711, i er year. Maiming A ful(ilbnrnt of the of f trial plan
for growth of total trade-from $24.5 billion in W70 to $12.N billion in 19751-thix
would heave only altotlt $11.7 billion ill trade witll Al other timlitI4n.-Co fella.
nhl and Free Wocld. Soviet trade with other (;onnnnlnict r.mnttiro-Nntih
vir-ftlanu C(ttllmliilicl Chin;, Nr-ih }tetra, Mrngc'tia, 1tt};r'tla!'ia, htl!I 011'9,-
was vAlu(d at $2.0 billion in 11170, If the value, of this trade remained tit tile
same level in 1975 as in 1970--a highly unlikely prosilec-t-a residual of about
$9.I billion Is felt for trade Willi the Frre Wrnid. Since tilts trade %% I" vallstil
at V4.5 billion In 19170, the $01X) million inrtrasr by 1973 would imply an average
annual growth of only I %fro.
84. Hut
tilt, prnlr'ted .11^'A .1a(O increase In total Soviet
foreign trade is a inininuhnh figtre. On the other hand,
unirss these countries
purchase more front the USSR, Soviet irarhasrs will not 1::r-renww. in this
context. the low official target for growth of overall trade may serve as a warn.
ing to Western trade partners that Soviet indebScvlnrrss to the developed West,
cmupiet) With relatively low holdings of foreign currency, inlixlses a heavy con-
straint on Soviet ability to import and a step-up of export% of Soviet goods
is required. In any case, the. USSR will lx' very reluctant to reduce imports of
We stern machinery and equipment. One partial approach the Soviet leaders
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