SOVIET ECONOMIC PLAN FOR 1966-70

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP08S01350R000100020002-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 15
• Document Creation Date: December 21, 2016
• Document Release Date: September 12, 2008
• Sequence Number: 2
• Publication Date: March 11, 1966
• Content Type: REPORT

11 March 19 66 V..Sl25X1
SPECIAL REPORT
SOVIET ECONOMIC PLAN FOR 1966-70
CENTRAL INTELLIGENCE AGENCY
O F F I C E O F R E S E A R C H A N D R E P O R T S
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SOVIET ECONOMIC PLAN FOR 1966-70
The goals of the recent y announced Soviet five-
year plan (1966-70) suggest that the Brezhnev-Kosy-
gin regime is making a det rmined effort to regain the
economic momentum of the 1950s. As calculated by CIA,
the planned rate of growth for the gross national prod-
uct (GNP)--6g' to 7 percent a year--is comparable to
the over-all growth of the 1950s and is considerably
above the 42-percent average achieved between 1961
and 1965. In drawing up the plan, the new leaders
have quietly scaled down the previous goals for 1970
put forward by the overly optimistic Khrushchev in
1961.
To achieve the intended acceleration in economic
growth the planners are counting less on new inputs of
labor and capital than on rapid increases in productiv-
ity--that is, in the efficiency with which labor and
capital are used. In general, the output goals set for
the next five years can be achieved provided the rates
of increase in productivity of the 1950s can be resumed.
A major emphasis, however, is being placed on expanding
investment in agriculture, which in recent years has not
been responding to increases in investment nearly so
well as Soviet industry.
No major shifts are apparent in the allocation of
resources among the principal claimants--defense, in-
vestment, and consumption. As before, investment is to
grow at a higher rate (81 percent annually on the aver-
age) than GNP, and consumption at a lower rate (5Q per-
cent annually). Not surprisingly, specific information
on plans for defense production is lacking. The general
patjern of resource use proposed in the plan, however,
suggestJthat outlays on defense are scheduled to increase
at about the same rate as GNP and that defense will con-
tinue to claim about 10 percent of GNP measured in ruble
prices. Similarly, the goals for total production of
machinery and for civilian uses of machinery suggest
that the share of machinery output allocated to mili-
tary and space programs will not change appreciably.
Industrial production is
scheduled to increase by 47-50
percent during 1966-70. Although
the new 1970 goals for individual
sectors of industry--particularly
the chemical industry--are below
those set in 1961, their achieve-
ment will require a considerable
rise in the rate of increase of
productivity. The plan places
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Figure I USSR PLANS TO REGAIN 195I-60 LEVELS OF PRODUCTIVITY
OF CAPITA. AND LABOR IN INDUSTRY
OUTPUT
8.9
Planned average
annual increase
PRODUCTIVITY OF CAPITAL
AND LABOR COMBINED
0
61405 1951-60 61-65 66-70 1-60 61-65 66-70
special emphasis on incrq'asing
consumer-oriented output on
improving the quality and as-
sortment of metals.
The basis for the projected
average annual increase of 8 to
8E percent in industrial pro-
duction is' an annual 2$-per
en- -eT-e&e~se in industrial em-
ployment and' 92-percent in- .
crease in plant and equipment.
This means that the Soviet lead-
ership is counting on an average
annual increase of 4 percent in
output per unit of labor and
capital combined. During 1961-65
the average increase in produc-
tivity was only Lz percent. As
a result, the industrial-growth
rate fell off substantially.
(See Figure 1.)
The new plan lists a vari-
ety of ways for raising produc-
tivity in industry: (1) in-
creased use of foreign science
and technology; (2) concentra-
tion on the introduction of
technically advanced machines;
(3) modernization and more ef-
ficient use of existing plant
capacity; (4) improvement of
managerial methods, standardi-
zation of products, and special-
ization of facilities; and (5)
stepped-up incentives for manag-
ers and employees in the form
of higher salaries and a more
direct relation of pay levels
to plant productivity. As
these approaches are not new,
the successful achievement of
the planned goals for produc-
tivity and output depends on
finding better methods of per-
suading enterprise managers
and the ministerial bureaucracy
to carry them out.
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Actual average
annual increase
INPUTS OF CAPITAL
AND LABOR COMBINED
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INDUSTRY UNDER NEW SOVIET FIVE-YEAR PLAN
Percentage figures show average annual growth. Absolute figures are in million metric tons
(MMT), thousand metric tons (TMT), billion cubic meters (8CM), and billion kilowatt-hours (8KH).
KHRUSHCHEV'S CHEMICAL GOALS ARE CUT
USSR USSR us
1965 OUTPUT 1970 PLANNED OUTPUT 1965 OUTPUT
Khrushchev's Plan New Plan
(TMT) (TMT) % Increase (TMT) % Increase (TMT)
All chemical output - - 19 - 15 -
Mineral fertilizer 31,300 75,000* 19 63,500* 15 55,100
Plastics and synthetic resins 821 3,750* 35 2,200* 22 5,100
Synthetic and manmade fibers 407 1,350 27 805* 14% 1,500
* Midpoint of range.
GOALS FOR PRODUCTION OF METALS AND ENERGY
GENERALLY CONTINUE PAST TRENDS
USSR us
Actua
l Planned
Planned
Output
% Increa
Basic metals 1961-19
se % Increase
65 1966-1970
Goal
1970
1965
Crude steel 7
7
126% MMT
119 MMT
Rolled steel 7
6%
97 MMT
85 MMT**
Aluminum 11
15
2,100 TMT
2,490 TMT
Copper 9%
10%
1,270 TMT
1,930 TMT
Energy Components
Gas 23%
12%
232% BCM
4S0 SCM
Oil 10%
7%
350 MMT
380 MMT
Coal 2%
3
670 MMT
476 MMT
Electric power 11%
11
845 BKH 1,220 BKH
* 1970 goals shown at midpoint of ranee oneapt aluminum
** This is 1964 cguro, latest available.
GROWTH IN ALLOCATIONS OF MACHINERY AND EQUIPMENT
A
ctual % Increase
Planned % Increase
1961-1965
1966-1970
7%
10 to 11
Investment
10%
10%
Consumer durables
7%
13
Military and space
4
8% to 12*
? Calealabd as a residual.
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Under the new five-year
plan, chemical output is sched-
uled to grow at almost twice
the rate established for indus-
try as a whole during 1966-70.
The over-all chemical goal for
1970, however, is almost 16 per-
cent lower than the one that
Khrushchev set and the 40-per-
cent cutback in the goals for
plastics, resins, and chemical
fibers reflects a realistic as-
sessment of the problems in-
volved in getting new capacity
into operation in these areas.
(See Table 1.)
The production of nonfer-
rous metals and the concentra-
tion on the quality and assort-
ment of ferrous metals appear
to be gaining at the expense of
chemical production. Aluminum
output is to double, and the
production of more quality fin-
ished-steel products will be
stresssed. This emphasis on se-
lected metallurgical products
supports Western suspicions that
the poor quality of chemically
derived products in the USSR is
forcing it to make more exten-
sive use of costly ferrous and
nonferrous metals. (See Table
2.)
The production of primary
energy is to increase at an av-
erage annual rate of 6,2 percent
during 1966-70, slightly less
than during the past five years.
Nevertheless, the average abso-
lute increase in output during
1966-70 will be one-third greater
than the average tonnage increase
during 1961-65--enough to meet
domestic requirements and to in-
crease exports. The 1970 goal
for production of natural gas is
much lower than the earlier tar-
e_,ffort during 1961-65 and
re compared in Table 3.
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SPECIAL REPORT 11 Mar 66
get, probably because of lower
estimates of the demand for gas.
By 1970 crude oil is to dis-
place coal as the leading sup-
plier of energy (36 percent),
the share of coal will fall
from 42 percent to 35 percent,
and gas will account for about
20 percent of all energy pro-
duced.
Soviet machinery output is
scheduled to increase by 10 to
11 percent per year, or more
rapidly than industrial output
as a whole. Of the five commod-
ity groups with the highest
planned growth rates, three are
consumer durables (passenger
cars, refrigerators, and TV
sets) and two (chemical and tex-
tile equipment) are important
in the production of consumer
goods. The five next most rap-
idly growing commodity groups
include agricultural machinery,
tractors, and trucks.
A comparison of the planned
output of machinery in 1970 with
the goals for investment in
equipment and with the planned
increase in production of con-
sumer durables suggests that the
allocation of machinery for mil-
itary and space purposes could
grow at more than twice the rel-
atively low rate estimated for
1961-65. Nevertheless, the
share of machinery output de-
voted to the military-space ef-
fort should remain about the
same, as civilian uses will grow
at approximately the same rate
as total output of machinery.
Average annual rate of growth
in allocations of machinery and
equipment to investment, consumer
durables, and the defense and
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Agriculture
The agricultural goals
appear ambitious both in out-
put expectations and input
plans. The planned average an-
nual rate of increase in gross
farm output of 51 percent is
nearly three times that achieved
during the first half of the dec-
ade and clearly depends on ful-
filling the goals for allocat-
ing increased resources to the
farm sector. The phrasing used
in the plan is: "Between 1966
and 1970, there is to be a 25-
percent increase in the average
annual volume of output of agri-
cultural products, compared
with the average annual produc-
tion-in the preceding five-
year plan period." CIA's esti-
mate of a 52-percent average
rate of growth was obtained by
calculating the rate of growth
necessary in 1966-70 to exceed
total output in 1961-65 by 25
percent.
The regime's 1966-70 goals
for investment and production
of farm machinery, first an-
nounced a year ago, have been
reaffirmed in the plan direc-
tives. Investments are to
total 71 billion rubles during
the 1966-70 period, almost dou-
ble that achieved in the preced-
ing five years, and a large
share of these funds are to be
expended on rapid increases in
acquisitions of farm machinery.
Planned deliveries of tractors
and grain combines during 1966-
70 are to be 60 percent above
the previous five-year period;
deliveries of trucks are to
triple. (See Table 4.)
Khrushchev's target of 70
million tons of fertilizer to be
delivered to the farms in 1970
has been reduced to a more real-
istic 55-million metric tons.
This goal, however, will require
a doubling of deliveries by 1970.
The new plan also cuts back
Khrushchev's goal for a 50-per-
cent expansion of irrigated acre-
age to a more reasonable 25 to
30 percent.
The implied output goals
for meat and milk are relatively
conservative, especially when
compared to those previously
adopted by the Khrushchev re-
gime (see Table 5). Success in
reaching these targets, however,
as well as achieving the over-all
agricultural output goal is heav-
ily dependent on achieving the
projected growth in grain output.
The new plan implies an
average grain harvest of 138 mil-
lion tons during 1966-70, 32 mil-
lion tons greater than the aver-
age harvest for 1961-65; an an-
nual grain harvest of this mag-
nitude would probably assure at-
tainment of the meat and milk
targets, restore self-sufficiency
in food grains, and enable the
USSR to resume its role as a
major exporter of grain. Follow-
ing the poor 1963 harvest, the
USSR imported 12 million tons of
Western grain, and, again, fol-
lowing the mediocre 1965 harvest,
imports of 9 million tons were
arranged. Each million tons im-
ported costs the USSR approxi-
mately $65 million in scarce
foreign exchange.
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AGRICULTURE UNDER NEW SOVIET FIVE-YEAR PLAN
Table 4
RESOURCES ALLOCATED TO AGRICULTURE
SCHEDULED TO RISE SHARPLY
Actual Planned
19%1.65 1966-70
Gross fixed investment 6
Billion rubles
37
71
Average annual percentage increase
121/2
14/2
Increase in drained area
Million acres
7
15 to 16
Increase in irrigated area
Million acres
31/2
6 to 71/2
Deliveries of machinery
(Thousands)
Tractors
1,092
1,790
Grain combines
384
550
Trucks
378
1,100
Use of mineral fertilizer
Average annual percentage increase
19
151/2
Use of electric power
Average annual percentage increase
16
23
Table 5
MEAT AND MILK PRODUCTION
( MILLION METRIC TONS)
Actual
1965
Production
USSR US
Planned 1970 Production Actual
Khrushchev's New 1965
Plan Plan Production
Meat 91/2 20 to 25 12 to 13 29
Milk 721/2 115 to 135 85 to 90 113'/2
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The bulk of the increase in
grain production is planned to
result from higher yields since
there is little likelihood of
a large increase in sown acreage.
The expansion in acreage from
reclamation and irrigation will
probably be offset by a decline
in the sown area in marginal
grain areas if planned crop ro-
tations are instituted. While
there is no assurance that the
planned increase of 30 percent
in grain production can be
achieved, the plans for boost-
ing output are impressive. This
is particularly true for the
northwestern part of European
Russia where precipitation is
adequate and soil additives of
fertilizer and lime would
quickly raise yields.
The total stock of plant
and equipment is to grow at
about 10 percent, the same
high average annual rate that
has prevailed since 1950. This
growth is to be supported, how-
ever, by higher rates of increase
in investment than in 1961-65,
when extensive repair of indus-
trial plant and equipment was
used as a stopgap measure to de-
fer retirements.
Important shifts are to
occur in the composition of capi-
tal stock during 1966-70 as-an
increasing share of investment
Page 7
in plant and equipment is allo-
cated to agriculture (see Figure
2). At the same time that the
growth of plant and equipment in
agriculture is to accelerate, the
growth of industrial plant and
equipment is to slow down, partly
because of higher retirement
rates (see Table 6). This devel-
opment could have serious long-
term consequences for over-all
growth of the economy, because
production in industry histori-
cally has responded much better
to increases in plant and equip-
ment than has production in agri-
culture.
The stark situation in agri-
culture, however, has necessi-
tated this further shift away
from other sectors of the econ-
omy in the planned allocation
of investment in 1966-70. Al-
though the rate of growth of in-
vestment in agriculture far out-
paced all other sectors of the
economy during 1961-65, gross agri-
cultural production responded
with an average annual increase
of only about 2 percent. Clearly
the efficiency of capital in So-
viet agriculture is among the low-
est in the major nations of the
world. Whereas 7 percent of
total investment is allocated to
agriculture in the US, the share
in the USSR has risen from 14 per-
cent in 1960 to 19 percent in
1965, and it is estimated that
this figure is planned to be about
25 percent in 1970.
Investment in housing and
services (excluding transport and
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INVESTMENT UNDER NEW SOVIET FIVE-YEAR PLAN
Figure 2
FURTHER SHIFT OF INVESTMENT TO AGRICULTURE SCHEDULED FOR 1966-70
* Including transport and communications
CONTINUED HIGH RATE OF GROWTH IN TOTAL PLANT AND
EQUIPMENT MARKED BY EMPHASIS ON AGRICULTURAL SECTOR
AVERAGE ANNUAL PERCENTAGE RATE OF GROWTH
Actual
Actual
Plan
1951-1960
1961-1965
Investment in new plant and equipment
111/2
8
10
Industry
12
7
8
Agriculture
12
12'/2
141/2
Total stock of plant and equipment
101/2
10'/2
10'/2
Industry
111/2
11
9
Agriculture
12
11'h
13
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communications) is to increase
about five percent per year dur-
ing 1966-70, well above the one-
percent average annual rate
registered during 1961-65. The
new rate, however, will still
lag far be ind investment in
new plant and equipment. The
projecte annual rate of in-
crease of seven percent in
housing investment in 1966-70
results from the fact that con-
struction of new housing has
shown a general decline since
1959 and consequently is pro-
jected from a low base in 1965.
The total volume of investment
in housing and services during
1966-70 is planned to be only
about 18 percent more than in
1961-65.
Real income per member of
the working population is planned
to increase at an average an-
nual rate of 52 percent during
the plan period, compared to the
four-percent annual increase
achieved during 1961-65. Most
of this growth will result from
higher wages, with about one-
fifth of the rise planned to
come from an average annual in-
crease of six percent in per
capita expenditures by the state
for pensions, grants, education,
and health services. A smaller
share is to come from the con-
tinued policy of selective price
cuts. (See Table 7.)
The average wage of non-
farm workers is to increase 32
percent annually, approximately
the same rate as achieved in
1961-65, largely as a result of
across-the-board increases in
bonus payments as enterprises
convert to the new system of
economic management. In con-
trast, wage rates in recent
years were increased in conjunc-
tion with the implementation of
wage reforms and were of partic-
ular benefit to workers in the
lowest pay categories.
The average wage paid by
collective farms is to be raised
six to seven percent annually
through 1970. The new leader-
ship is striving to break the
collective farms' cycle of low
economic incentive and low pro-
duction by raising the incomes
of collective farmers not only in
absolute terms but in relation
to incomes of nonfarm workers.
But even raising peasant incomes
by 40 percent will bring them
up only from 50 percent of non-
farm workers' incomes in 1965
to approximately 60 percent in
1970. Services to rural areas
in the form of libraries, child-
care facilities,and medical ser-
vices are to be emphasized dur-
ing the plan period. However,
collective farmers still will
not enjoy equal footing with
state workers in matters of
pensions and other social bene-
fits.
The Brezhnev-Kosygin leader-
ship is making an effort to raise
living standards but has been
forced to ignore some of Khru-
shchev's expansive promises for
1970. Unmentioned in the new
plan are former pledges to:
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LIVING STANDARDS UNDER NEW SOVIET FIVE- YEAR PLAN
Table 7 MODERATE BOOST PLANNED IN CONSUMER WELFARE
AVERAGE ANNUAL PERCENTAGE RATE OF INCREASE PER CAPITA
Actual Plan
1961.65 1966-70
Real income per worker 4 5'/2
Non farm wages* 3'/2 3'/2
Public consumption funds** 6 6
Total consumption 3 4'/2
Food 2'/2 4
Durable goods 5'/2 10
Housing space 2'/2 2
* Wages paid to workers in state-owned enterprises, of which 10 percent are employed in agriculture.
** Public consumption funds finance such items as pensions, stipends, leave pay, education, and medical services.
Figure 3 MARKED IMPROVEMENT PLANNED IN QUALITY OF DIET
USSR LEGEND US -IN
at
0 40
potatoes and
grain products
animal
products*
milk and
milk products
New Plan Khrushchev's
1970 Plan For 1970
* Excludes milk.
** Excludes butter.
*** Includes fruit and vegetables, eggs, nuts, and other quality foods.
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(1) Reduce the length of
the work week from 41 to 35
hours without reducing wages.
The inability to meet labor
productivity goals in the past
caused planners to postpone
adoption of what would have
been the world's shortest work
week.
(2) Abolish the income tax
on the earnings of state work-
ers. Failure to carry out this
promise will cost workers about
10 billion rubles annually dur-
ing 1966-70.
(3) Raise the minimum wage
from 40 to 50 rubles a month.
Last year the regime claimed
that the average monthly wage
for workers and employees
amounted to 95 rubles.
Plans for Consumption
The primary consumption
goals are to increase the quality
and quantity of food and manu-
factured goods reaching the
people and to narrow the gap
between urban and rural levels
of living. Per capita consump-
tion is to increase slightly
more than four percent per year,
compared to less than three per-
cent during 1961-65. Continual
references to quality improve-
ment in the plan indicate the
regime recognizes that low qual-
ity of consumer goods is a sore
point with the populace.
Per capita consumption of
food items is to increase about
four percent annually in value
terms through a shift to a higher
quality diet. By 1970, the share
of calories obtained from potatoes
and grain products is to drop
from its present 57 percent to
about 46 percent (see Figure 3).
Per capita consumption of meat
is to increase by 25 percent,
fruit by 45-50 percent, and vege-
tables by 35-40 percent.
Only a few goals have been
specified for the production of
durable consumer goods. In con-
trast to policy under Khrushchev,
the production of passenger cars
is to increase at an average an-
nual rate of 30 percent, to a
level of about 750,000 in 1970;
attainment of this goal is not
possible without foreign assist-
ance--as exemplified by the agree-
ment-in-principle with Fiat of
Italy. The output of other con-
sumer durables such as refrigera-
tors, radios, and furniture will
be increased substantially. Even
if these goals are met, supplies
of these goods will remain con-
siderably below those in the US
on a per capita basis.
Sales of cloth and clothing
are to increase by 40 percent,
knitwear by 90 percent. Emphasis
will be on the production of lines
of fabric and clothing that are
in relatively great demand, qual-
ity is to be stressed, and special
efforts are proposed to improve
their supply in rural areas.
The most serious problem af-
fecting the consumer in recent
years has been the supply of hous-
ing. The seven-year plan for
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housing was underfulfilled by
more than 30 percent. The
shortfall in completions last
year was greater than in 1964
despite promises by the leader-
ship to spur dwelling construc-
tion. The 1966-70 goal for
state and individually financed
housing is nevertheless for
about 25 percent more than was
constructed during 1961-65. If
the government is willing to
commit sufficient resources,
the goals can be met, increasing
living space from the present
72 square feet per capita to
"77VIi4 (as compared with approxi-
mately 215 square feet in the
industrialized countries of
Western Europe).
Although the government has
been willing to encourage private
activity in agriculture, it has
not yet attempted to solve the
housing problem by specifically
encouraging private building.
The 1966-70 plan for private
house construction calls for a
total of 15 percent less space
than was built during 1961-65.
The promised improvement in
variety and quality of construc-
tion materials for sale to the
public appears to be intended
only to slow the decline of re-
cent years.
The new plan calls for a
marked increase in service and
trade facilities in rural levels
of living. The volume of domes-
tic services, which is to increase
by 2.5 times for the country as
a whole, is to increase by three
times in rural areas, and the
supply of electric power for home
use is to increase by three times
in rural areas as against 1.6
times for the entire country.
Changing Pattern in Education
During 1966-70 the USSR
plans to slow down the growth
of enrollment at higher educa-
tional institutions while accel-
erating the growth of enrollment
at secondary specialized schools
(tekhnikums). This shift appar-
ently reflects the USSR's inten-
tion, first announced in 1963,
to increase the ratio of techni-
cians to engineers in the economy
in order to reduce the subprofes-
sional workload being handled
by its professional personnel.
The planned slowdown in the
growth of college enrollments
should affect primarily the part-
time programs, which for several
years have been criticized pub-
licly for'.the inferior quality
of their graduates.
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SECRET
Approved For Release 2008/09/12 : CIA-RDP08SO1 350R0001 00020002-3