WEEKLY SUMMARY SPECIAL REPORT PRIVATE ENTERPRISE ALIVE BUT NOT WELL IN THE USSR

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001500020016-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 22, 2016
• Document Release Date: August 14, 2009
• Sequence Number: 16
• Publication Date: March 20, 1970
• Content Type: REPORT

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Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
Private Enterprise: Alive But Not Well in the USSR
DSP FILE COPY
RETU~ 1J TO IE-61
DOCUMFNT BRANCH
1. SERX?9' 6 qms Secret
BILE COPY N2 678
TROY ;f 20 March 1970
No. 0362/70A
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Popular Western conceptions, or misconceptions, of the role of private
economic activity in the Soviet Union probably run the gamut from the
belief that it is insignificant to a suspicion that it plays a dominant part in
providing the populace with food and a broad range of consumer services.
The truth, as usual, lies somewhere between the extreme views. The Soviet
economy is predominantly a socialized economy; yet certain private eco-
nomic activities are permitted. The conduct of these activities in ariably is
restricted to an individual or family scu1e of operation, but the aggregate
impact of private activity is significant.
PRINCIPAL FIELDS OF PRIVATE
ECONOMIC ACTIVITY
Private economic activity in three fields is
sanctioned, under strict controls, by the Soviet
Government. The Soviet citizen is allowed to
grow and market his own agricultural products,
build his own home, and work in some profes-
sional, personal, or repair service field. In addi-
tion, he is known to indulge in various other
economic activities illegally, sometimes with little
interference from the authorities. Some of these
illegal activities-such as prostitution and black
market traffic in foreign currencies and consumer
goods--are impressively evident to foreign visitors,
yet have little impact on the economy at large.
Others-particularly the theft of building ma-
terials and of agricultural products From social-
ized organizations--are less visible but may be of
substantial economic importance. Unfortunately,
the scarcity of data on illegal activities prevents
discussion in precise quantitative terms.
Private agriculture consists of cultivating
garden plots ranging in size up to an acre and a
half', tending small flocks of poultry, and keeping
livestock, usually only one or two head. The size
of the plots and the numbers of livestock and
poultry tended are strictly regulated, as are the
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assignments of the plots themselves. In rural
areas, plus on the socialized farms are allocated
to households with one or more members em-
ployed either on state or collective farms or in
other socialized enterprises or organizations. Plots
also are assigned to households in urban areas
whose heads have jobs in the socialized sector.
For the most part, urban householders' plots are
found in clusters on the outskirts of cities.
Because of the small size of the private plots
and the market conditions, private agriculture
concentrates on crops and products that require
relatively little land. Leigh value, labor-intensive
products such as potatoes, vegetables, fruit, pleat,
milk, and eggs are dominant.
Most of the privately produced goods are
consumed by their producers, but some are sold
to socialized processing and distribution organiza-
tions and some are sold by their producers on
farmers' markets known as collective farm mar-
kets. Prices in these markets, which are main-
tained by the authorities in all towns and cities.
are largely determined by supply and demand and
usually are higher than the fixed prices of the
state retail stores. Product quality, however, is
higher in the collective farm markets.
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vv~
Figure 1. Ha 3TOM yxa6e n / OM nocTpo.nl
("I built a house on that bump !,,)
Figure 2. CTOJ16OBAA 40POrA
( The high road ")
(FRUIT AND VEGETABLE STORE)
(V) iUT L!UI rr, rau~L -' 'i.
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("How about a couple of nicely salted cucumbers!")
-dll cartoons from Krokodil
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Construction of dwellings is the most impor-
tant nonagricultural type of private enterprise.
Private construction is concentrated in rural areas
and on the outskirts of smaller towns, where local
authorities allocate parcels of land. As private
building is limited to do-it-yourself arrangements,
privately built houses characteristicaily are
crudely and simply built and rectangular and sin-
gle story in design. Unskilled labor is normally
used, and many of the materials are cast-offs from
state construction projects. Even cadged materials
sometimes are of first class quality, however. (See
Figures 1 and 2.) Utilities, in rural areas espe-
cially, generally are lacking, except for electricity.
Some new houses, however, are without even
that. Single family residences are limited to 60
square meters (646 square feet) of floor space.
This means that the typical privately built house
measures only about 20 by 32 feet. 11' several
families join to build a multifamily dwelling,
space per family is not to exceed 60 square
meters. Private ce:istruction is financed from per-
sonal savings and state loans.
Work in private services covers a broad and
poorly defined range. It includes (I ) professional
services such as medical and dental care and the
teaching of languages and music,(2) repair work
on shoes, electrical appliances, musical instru-
ments and housing,(3) personal services such as
barbering, hairdressing, and sewing,and (4) handi-
craft work such as boot making, gold working,
and embroidery. Also, there is a "gray" area in
which service activities are tolerated but not le-
gally sanctioned. Included in this area is work
done on bicycles, motorcycles, and automobiles,
house painting, furniture moving, and the delivery
of goods.
IMPORTANCE OF PRIVATE ACTIVITY
The share of Soviet gross national product
(GNP) generated by the private sector has been
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declining irregularly over time. Since 1950 it has
dropped from about 22 percent to a current level
of approximately 10 percent. The absolute value
of private production, however, increased slightly
over this time span. Moreover, mere allusion to
tho proportion of' GN13 generated by the private
sector ill' ' 'relays the importance of its contribu-
tion. Prihu1e activities contribute directly and ap-
preciably to the quality of Soviet consumers' lives
and are not qualitatively duplicated by the social-
ized sector.
About eight percent of GNP and 31 percent
of net agricultural production are accounted for
by private agricultural activity. Because of the.
low quality and spotty availability of perishable
foodstuf'f's in the socialized stores, Soviet con-
sumers rely on produce from their own plots or
buy the major share of their high-quality vege-
tables, meat, dairy products, and other perish-
ables directly from other private producers. Even
the manager of' a state fruit and vegetable store
may depend on private vendors to satisfy his
personal wants. (See Figure 3.)
The relatively large share of total crop out-
put accounted for by the private sector (about
one-fourth) is grown on about four percent of the
total area under crops. In the private sector, the
value of output per unit of land is nearly nine
times as great as in the socialized sector. More
than half of this difference in value is accounted
for by the difference in crop composition in the
two sectors. For example, vegetables are more
common in the private sector and grain is more
prevalent in the socialized. The rest of the dif-
ference can be chalked up to the application of
more and better labor to each unit of land in the
private sector. People who tend private plots give
greater attention to weeding, watering, fertilizing,
and killing pests. Partly because they exert such
effort, the plot tenders can and do plant vege-
tables and potatoes more densely than farmers in
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the socialized sector. The diligence of private
growers no doubt is clue in large pleasure to the
knowledge that the produce of their l,lots is their
own for consumption or for sale.
Private production accounts for nearly 40
percent of all treat production, although the an-
nual census of livestock shows that private owners
have only about a quarter of the animals. The
anomaly seems to be largely accounted I'or by
reluctance of private producers to keel) livestock
through the winter, when ma illtcllance costs are
high. The livestock census is conducted on I
.lanuary each year.
Privately owned livestock are not entirely
maintained by feed grown on privately held land.
In addition to the 21 million acres of land di-
rectly under the control of households--which
includes one and a quarter million acres of wild
hayland--privately owned livestock are sustained
by roughly 250 million acres of pasture and 70
trillion acres of hayland in the socialized sector.
In addition, the household members receive feed
as payment ill kind for work in the socialized
sector, and, apparently, they steal :i good deal
more from the state and collective farms.
As has been noted, a portion of private I'arnl
production is sold through the collective farm
markets. In 1968, collective farm markets ac-
counted for about five percent of retail sales of all
food, but for larger portions of retail sales of
perishables, such as eggs (20 percent), meat (10
percent), and milk (I0 percent). Even larger pro-
portions of fruit and vegetables are sold in the
collective farm markets.
In 1968, private construction of housing
generated only about two percent or GNP and
absorbed only one sixth of investment ill housing,
but it accounted for about one third (by floor
area) of the housing completed. Roughly 55 per-
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ce. ~ of the total atllount of housing now is pri-
vat 'y owned, in contrast to 70 percent in 1950.
In urban localities the private share is only about
one third and is falling rapidly. Private construc-
tion is most conlnloh in the rural areas, where
socialized construction of housing is least devel-
oped and 80 percent of the dwellings still are
privately owned.
Privately rendered services generate less than
one hall' of one percent of GNP and comprise less
thtul five percent of all consumer services. Never-
theless they uniquely f'ulf'ill certain spec:l'ic
needs --particularly in small towns and rl.~ral
areas---that are not served by socialized service
organizations,
POLICY TOWARD PRIVATE
ECONOMIC ACTIVITY
Official government policy toward private
economic activity over the long run has been
characterized by antagonism and repression. This
approach, which has been common to the Stalin
and post-Stalin governments, is rooted in the
ideological underpinnings of Conlnlunism. It is
related to an assumption that all Soviet citizens
sooner or later voluntarily will surrender their
rights to engage in private enterprise when the
superiority of socialized production becomes
manifest.
Despite their continuing hostility toward pri-
vate activity, however, various Ieadershavcdenl-
onstrated la good deal of' Ilexibility in the short
run, particularly toward private agricultural pro-
duction. Changes in policy toward private farming
and resulting fluctuations in private farm output
have been rather prominent and appear to be
related closely to success or lack thereof in the
socialized sector. After a period of relatively rapid
growth--or even it single year of' exceptional per-
formance by the collective and state farms-there
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is a tendency to tighten the restrictions on private
farming. Limits on the size of private plots and
Iivestock holdings are made more stringent, taxes
are increased, confiscations occur, less feed is
made available to householders, and the number
of days that collective farm members are required
to work in the socialized sector is increased.
Then, when socialized farm production falls short
of needs and expectations, restrictions on private
agricultural activity are relaxed.
The 1956-64 period under Khrusllchev was a
time of restriction and decline in private agricul-
tural production. When Brezlunev and Kosygin
assumed power in late 1964, socialized agriculture
was floundering, and the new government began
to encourage private farming. By 1967, socialized
agriculture was performing more satisfactorily,
and the attitude of the leaders toward private
farming became ambivalent or indifferent. In the
absence of direct orders to the contrary, local
authorities, responding to continuing pressure
from higher authorities for greater socialized pro-
duction, then put more restrictions on the private
farmers. This restrictiveness, combined with side
effects from certain official policies in the social-
ized sector, brought a decline in individual live-
stock holdings and a standstill in private pro-
duction of crops and meat and dairy products.
Concurrently, socialized output of meat and dairy
products leveled off, and this at a timr when
consumer demand for high quality foodstuffs was
increasing rapidly. In late 1969 there were signs
that once again a turning point in official policy
had been reached. The leadership began to urge
local authorities to aid the he useholds in main-
taining or expanding their livestock holdings. Lo-
cal Communist Party organizations were ordered
to check on the response to these exhortations.
Although it is too early to judge, the downward
trend in private livestock holdings may be slow-
ing. Even though the value of private livestock
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holdings declined five percent during 1969, hog
numbers increased by more than ten percent after
three consecutive years of decline.
The short-run attitude of the leadership to-
ward private construction of dwellings has been
less variable, but periods of expansion and con-
traction of' private home building have occurred.
Private building surged during 1957-60 in re-
sponse to official encouragement, only to de-
crease in the early 1960s when new constraints
were imposed. After 1966 there w,,s some further
reduction in private building, but that apparently
was caused by shortages of building materials
rather than by administrative restriction. The
Brezhnev-Kosygin government seems to want to
maintain private building at approximately the
current level. Construction by individual would-
be home owners is not a very promising approach
to the extreme shortage of housing that prevails
in Soviet cities, but it does play a very useful role
in smaller towns and rural areas.
Soviet leaders have found little reason to
vary their generally hostile policies toward the
private provision of' services. Complete elim ina-
tio'n of' such activity, however, clearly would im-
pose unnecessary hardships on Soviet consumers
and further strain the capacity of' the already
inadequate socialized service network. Consumer
demand for privately provided services appears to
be increasing as money incomes rise. Since 1965,
suggestions that the private rendering of services
be allowed to expand have been publicized, but
little increase has been noted in the volume or
scope of private service activity.
Soviet leaders seem to realize that private
economic activity continues to enhance the qual-
ity of life in the USSR in ways that cannot be
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duplicated by socialized organizations. Hence it terprise altogether. Rather, they probably will
seems unlikely that they will indulge their ideol- conti'AIe to permit it under varying degrees of
ogically based hostility by outlawing private en- restriction.`
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