JOINT ECONOMIC COMMITTEE BRIEFING PAPER USSR: THE RECENT PERFORMANCE OF THE SOVIET ECONOMY AND PROSPECTS FOR THE FUTURE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90B01370R000300380004-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 79
• Document Creation Date: December 22, 2016
• Document Release Date: November 7, 2008
• Sequence Number: 4
• Publication Date: November 20, 1984
• Content Type: REPORT

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Record
Okt Vit28
:
rtom:
Mr. Richard Kaufman
Joint Economic Committee
Rm. G-01
Senate Dirksen Office Bldg.
Washington, D.C. 20510
STAT
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ANN CUT
Joint Economic Committee Briefing Paper
USSR: The Recent Performance of the Soviet Economy
and Prospects for the Future
ON FILE USDA (DEPARTMENT OF
AGRICULTURE) RELEASE
INSTRUCTIONS APPLY
Office of Soviet Analysis
Central Intelligence Agency
20 November 1984
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Table of Contents
Page
Introduction 1
Economic Performance in 1983 and 1984 1
Agriculture 3
Industry 4
Industrial Materials 5
Energy 5
Industries Supporting Investment 6
Consumer Nondurables 7
Transportation 7
Foreign Trade 7
The Beneficiaries of the Better Economic Performance 9
Defense 10
The Burden of Defense 10
Defense Spending Trends 12
The Procurement Slowdown 16
Policy Decisions 16
Technical Difficulties 17
Manufacturing Constraints 17
Industrial Bottlenecks 17
Defense Spending During the Recovery 18
Investment 19
Consumption 22
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Reasons for the Improved Economic Performance 25
The Recovery as a Statistical Anomaly? 26
Restoration of Balance 26
Productivity Growth 27
Policy Decisions 28
Outlook 29
The Near Term 30
Longer Run 32
Slower Growth in Labor and Capital 32
Rising Costs of Industrial and Agricultural
Raw Materials 33
Systemic Problems 34
Foreign Trade as a Spur to Economic Growth 38
Overall Long Term Assessment 41
Policy Implications 42
Domestic Policy 42
Foreign Policy 44
Eastern Europe 44
Rel ations with the Thi rd World 45
Bilateral US-USSR Rel ations 45
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Introduction
In our past testimony we have analyzed Soviet economic
performance and military spending over the last two decades.
Summarizing that testimony, we reported that economic growth in
the USSR was relatively robust during the decade of the sixties
and the first half of the 1970s. The mid-1970s, however, marked
a turning point in the economy's fortunes. Economic growth began
to decelerate and eventually fell below 2 percent for three
consecutive years--1979, 1980, and 1981. But the economy has
been doing somewhat better recently. GNP increased by about 3
percent in 1983 and growth continues to be higher in most sectors
in 1984, although the USSR's national product will rise by only 2
percent this year because of a poor harvest.
Our testimony this year will focus mainly on the
developments of the past two years. First we will review the
performance of the Soviet economy and its major sectors in the
last two years in an effort to assess the extent of the economic
upturn and the distribution of the modest growth dividend
available to the leadership. We will try to identify the reasons
for the improved performance and weigh their relative
importance. We then will give our assessment of Soviet economic
prospects over the next few years and for the second half of the
1980s and discuss the implications for the West in general, And
the United States in particular.
Economic Performance in 1983 and 1984
Soviet economic performance picked up marginally in 1983, a
trend that has continued in most sectors of the economy through
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(
October of this year. The 3-percent increase in GNP in 1983
represents an improvement over the poor showing the four previous
years when growth averaged only about 1-1/2 percent per year.
This better performance does not mean that the economy has
rounded the corner, leaving its economic difficulties behind,
however. Growth of GNP is still well below the rates posted in
the early and mid-1970s and thus is unlikely to provide much
relief for the leadership as they search for ways to devote more
resources to both defense and consumption without sacrificing
industrial modernization.
USSR: Growth of GNP and Selected Sectors of the Economy
Average Annual
Percent
Change
1971-75
1976-78 1979-82
1983
1984c
GNPa
3.7
3.7
1.6
3.2
2
Agricultureb
-0.4
5.2
-0.9
6.3
0
Industry
5.9
3.8
2.4
3.4
3.5
a Calculated at factor cost.
b Excludes use of farm products within agriculture but does not
adjust for purchases by agriculture from other sectors.
c Preliminary.
Some of the improvement in Soviet economic growth in 1983
and 1984 represents a rebound from 1982's low growth in much the
same way that the US economy records rapid rates of growth in the
initial stages of recovery from a recession. Moreover, for the
Soviet Union, the trend in GNP can be a misleading indicator of
the underlying health of the economy because of its sensitivity
to the ups and downs of agriculture. For instance, during the
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worst of the slowdown beginning in 1979 and continuing until 1982
and during the subsequent recovery, the change in agricultural
output explains roughly two-thirds of the change in GNP growth
even though agriculture accounts for only about 15 percent of the
national product.
An alternative measure of the condition of the Soviet
economy excludes agriculture from GNP to remove most of the
volatility of agricultural performance. Abstracting from
agriculture in this way gives a slightly different picture of the
economy since 1975 (figure 1). First, it shows that a
substantial part of the slump in GNP growth from 1979 to 1982 is
the result of unusually poor harvests in most of these years.
The rate of increase of non-agricultural GNP fell by only one
percentage point compared with the 2-percentage point decline in
the growth of total GNP. Second, the economic recovery in 1983
and 1984, although heavily influenced by agricultural performance
in 1983, also reflected improved performance in industry and key
service sectors outside of agriculture. Growth in non-
agricultural GNP has continued in 1984 at about the same rate as
in 1983. But because of the poor grain harvest this year,
overall GNP growth is likely to be around only 2 percent this
year. Problems in branches producing industrial materials and
fuel and the shortfalls in agriculture this year could, moreover,
curb economic development once again in 1985.
Agriculture
Farm output rose by 6.3 percent in 1983, reaching an all-time
high. Nevertheless, the value of total agriculture output in
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1983 was less than 5 percent greater than the previous record
achieved in 1978. The livestock sector performed particularly
well last year; production of meat and milk reached new
records. Some 16.4 million tons of meat were produced, one
million tons more than in 1982. The grain, potato, and sugar
beet crops also registered increases over the depressed 1982
levels.
Net agricultural production is expected to remain at roughly
the 1983 level this year. Output of livestock products will rise
again, but most crops will fall. The increased emphasis on
production of forage crops such as hay and silage--aided by
longer and more favorable growing seasons in both 1982 and 1983--
boosted feed supplies and led to higher milk yields and heavier
slaughter weights. On the other hand, we estimate that grain
production in 1984 will be only about 180 million tons--15
million tons below our estimate for 1983.
USSR: Output of Selected Agricultural Productsa
Grainb
Potatoes
Sugar beets
Cotton
Meat
Average Annual
1976-80
205
82.6
88.7
8.93
14.8
1981 1982 1983
158.0 180.0 195.0
72.1 78.2 83.1
60.8 71.4 81.8
9.64 9.28 9.22
15.2 15.4 16.4
a
In million metric tons.
See table 5 in appendix B.
Industry
The 3.4-percent increase in industrial production in 1983
was the highest since 1977. Growth at about the same pace seems
likely in 1984, although earlier in the year prospects appeared
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brighter than they do now. Industry has thus almost returned to
the rate of growth experienced in 1976-78, but not to the much
higher rates of the first half of the 1970s (figure 2).
Industrial Materials. The most significant improvement has
been in sectors producing industrial materials (figure 3). These
industries, which produce the raw materials and intermediate
products used throughout Soviet industry, faltered in the last
half of the 1970s. Their sluggish performance had transformed
some of the sectors into bottlenecks as plan requirements
outstripped domestic supplies. In some cases, notably steel,
imports have had to be increased to make up some of the
difference.
In 1983 and 1984, production in these branches grew by 3.6
and 3.1 percent per year respectively, compared with an average
growth of 1.4 percent during 1979-82. The turnaround in the
fortunes of the ferrous and forest products sectors was
especially helpful in easing the industrial materials
situation. In addition, chemical output has increased as much in
the last two years as in the previous four combined.
Nonetheless, there are already indications that the recovery in
industrial materials has begun to lose steam during 1984, casting
doubt on its strength.
Energy. Unlike industrial materials, the performance of
fuel industry as a whole has deteriorated even further (figure
4). The combined output of fuels grew at about 1 percent a year
in 1983-84 compared with 2 percent during the worst slowdown
years. The fall in coal production continues, and oil production
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has stagnated this year. An important offset to the coal and oil
picture is the robust growth in gas output, which hardly slowed
during 1979-82 and has accelerated slightly the last twoyears.
The electric power sector has also enjoyed a resurgence as a
result both of more reliable fuel supplies and the influence of
faster economic growth on the demand for power.
Whether slow growth in the fuels sector will ultimately
brake the recovery in industry depends on the success of energy
conservation and Soviet hard currency requirements. In 1982 and
1983, some progress seems to have been made in reducing the
consumption of fuel per ruble of GNP, permitting Moscow to
increase its sales of oil to the West.
Industries Supporting Investment. The performance of the
industries supporting investment shows a stabilization in the
growth of machinery production and some pickup in the output of
construction materials. The planners must be distressed by the
apparent failure of civilian machinery to rebound along with the
rest of the economy. During 1979-82, this branch had been about
the only the bright spot in the entire economy, even though its
growth had also slowed. This industry is important because it
produces the machinery and equipment used to promote future
growth.
Output of construction materials on the other hand, began to
rise at a comfortable rate after falling in 1979-82. Shortages
of construction materials and metals had limited construction
activity, so this reversal will help the construction-intensive
part of the Soviet investment plans, especially housing and the
Food Program.
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Consumer Nondurables. On the whole, the industries that
cater to the Soviet consumer did no better in 1983-84 than in
1979-82 (figure 5). The growth of output of soft goods continued
to decline, to a rate of only about one percent per year. But
production of processed foods grew slightly faster. To a large
extent, performance in this sector is the result of larger
harvests of vegetables and fruit and the continued large imports
of grain that were instrumental in spurring growth in output of
milk, meat, and eggs.
Transportation
During the past two years, the better showing of the
railroads, which carry 70 percent of nonpipeline traffic, is the
most significant development (figure 6). A smoothly running
transportation system is particularly important in a country the
size of the USSR because disruptions in deliveries that hurt one
plant can quickly multiply in effect throughout the economy. We
believe that the severity of the slump from 1979 to 1982 can be
partly blamed on gridlock in the transportation sector. Thus, a
sizeable portion of the industrial recovery can equally well be
attributed to improvements in this sector's performance.
The picture is mixed with respect to other modes of
transportation. The amount of gas transported by gas pipelines
continues to rise at double-digit rates, but traffic on highways
and rivers has declined.
Foreign Trade
The Soviet hard currency position by mid-1984 was quite
solid. In 1983, Moscow balanced off an increase in imports of
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machinery and equipment and pipe (needed to built the new gas
export pipeline) with a reduction in agricultural imports. At
the same time hard currency exports rose by almost half a billion
dollars, primarily because the USSR reacted to falling oil prices
by increasing the amount of oil exported to the West. The rise
in the volume of oil sales for hard currency was made possible by
an increase in oil obtained from OPEC countries in partial
payment for past deliveries of arms and a tight-fisted attitude
toward deliveries to Eastern Europe. The net result of these
transactions was a gain of almost $300 million in
merchandise trade balance for the year.
The trend in Moscow's hard currency position
Moscow's
continued to be
favorable in the first six months of 1984. Both exports and
imports, measured in current prices, fell compared with the same
period the previous year, but imports dropped by almost $1.3
billion more than exports. Machinery and pipe deliveries have
fallen off as the Urengoy-Uzhgorod gas export pipeline nears
completion. Meanwhile, unspecified exports, most of which are
sales of arms, were down by 15 percent during January-June. The
volume of oil exports to hard currency OECD countries, however,
apparently increased by at least 6 percent, offsetting a roughly
5-percent drop in average oil prices.
Although the Soviet hard currency trade surplus for 1984 as
a whole may be higher than the $4.7-billion surplus realized last
year, the overall improvement is not likely to be as marked as it
was during the first six months.
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The USSR will find it more difficult to raise the volume
of oil exports because domestic production has leveled
off.
Soft world oil prices will reduce hard currency receipts
for a given volume of oil exports.
Soviet grain purchases will increase sharply in the
second half of the year. Soviet hard currency grain
purchases in the 1984 calendar year will probably exceed
the 1983 bill by about $2 billion.
We do, however, expect imports of other agricultural
products and machinery and equipment to continue to
fall. Soviet equipment orders have fallen from $6.9
billion worth in 1982--when large orders for the export
pipeline were placed--to $2.2 billion in 1983 and to less
than $500 million in the first six months of 1984.
Moscow's healthy international financial position (and the
waning of sanctions) has been recognized in the increased credit
worthiness assigned to the USSR by Western banks. Soviet assets
in the West are at near record amounts, and Moscow's gross debt
to the West is at manageable levels--the ratio of debt service to
hard currency receipts is currently a respectable 15-16
percent.
The Beneficiaries of Better Economic Performance
How the leadership responded to the improved economic
picture in 1983 and 1984 provides a window on the regime's
current policies and intentions.
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Defense
Defense has been considered to have priority in the
allocation of resources in the Soviet economy. We cannot yet
conclusively establish how the economic recovery affected defense
spending, however, or, for that matter, how defense spending
might have impinged on the recovery. Nonetheless, since
reporting to you last year, we have noted evidence of some
acceleration in the rate of increase in defense spending.
The Burden of Defense. To understand the role of defense in
the economy, it is important to measure how defense diverts
national resources from other purposes. One such measure is the
share of GNP allocated to defense spending. In the Soviet Union,
this amounts to 13 to 14 percent of GNP, which is considerably
higher than the comparable 7-percent figure for the United
States. The Soviet defense share of GNP has remained roughly
constant since 1965 because the growth of defense spending has
matched overall economic growth. When economic growth slowed
after 1975, defense spending growth slowed correspondingly.
This ratio of defense spending to GNP simply measures the
trend in average share of all resources going to defense.
Certainly the impact of defense falls unevenly on different parts
of the economy. Material inputs must not only be made directly
available for defense, but other resources are needed indirectly
as inputs to produce the materials used for defense.
Some key industries must devote especially large shares of
their output to support defense programs (figure 7). For
example, more than 25 percent of all machinery production is
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allocated to military procurement even though procurement is no
more than 7 percent of GNP. In the process, resources are denied
to the civilian sector that otherwise could be used to promote
economic growth through, investment or to bolster consumer morale
by increasing the supply of consumer durables. In addition, as
much as a fifth of all metallurgy production, a key input for
construction and machinery production, may be needed to support
procurement. That the metallurgy industry has encountered
considerable difficulties in sustaining the growth of output in
recent years makes this large share all the more significant to
civilian industries. Other industries that contributed--directly
or indirectly--significant shares of their output in 1982 to
support military procurement include chemicals, electric power,
fuels, transportation and communications, and forest products.
If other resource categories of defense are taken into account,
such as O&M and RDT&E, the military demand on these industries
would be even greater.
The true burden of defense includes many intangibles
associated with defense activity that cannot be easily measured
sin quantitative terms. Examples of some that would raise the
burden include giving the military establishment priority access
to:
The highest quality raw materials for defense industry;
Transportation and distribution of raw materials for
defense purposes;
The best industrial workers for defense industry;
The national pool of research and development talent; and
M M
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-- The best, most advanced machinery.
Some other intangibles could lower the burden.
these include:
-- Using military construction troops
Examples of
on civilian projects;
-- Sending troops and military trucks to help with the
harvest; and
-- Training largely untrained and unskilled non-Slavic
minorities.
Finally, there are other activities that might be construed
as defense-related, which we do not even consider in our
estimates. This would include subsidized weapons sales, support
for surrogates such as Vietnam and Cuba, civil defense programs,
the dispersal and hardening of industrial sites, many
intelligence activities, some communications facilities, and
joint purpose projects, such as the BAM Railroad and city subway
systems. Although we have not been able to measure these
activities, it is clear that they would imply a defense burden
higher than our estimate of 13 to 14 percent of GNP.
Defense Spending Trends. In the ruble estimate, we use
constant prices (1970 is the base year) so that we can measure
the real growth in defense--that is changes in military manpower,
the volume of procurement and construction, and the scale of
research and development (RDT&E) and operations and maintenance
(O&M), excluding the effects of inflation. Budgetary discussions
in the USSR are presumably often conducted in terms of current
price data, however. We do not have access to current Soviet
defense budget figures, and our information at present is
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inadequate to update the price base to a more recent year. Thus,
our defense spending estimates do not replicate the figures the
present Soviet leaders consider in discussing their own defense
Issues. Figures on actual defense outlays measured in current
prices, if available, would show higher growth than our constant
price estimates because of inflation that characterizes the
Soviet economy generally. But since so much of Soviet planning
is conducted in physical rather than financial terms,
considerable information is undoubtedly available to the
leadership to permit them to identify the
expenditures in current rubles.
There have been two distinct periods
spending since 1965. Before 1976, growth
real trends underlying
in Soviet defense
in total defense
spending had averaged about 4 to 5 percent per year; after 1976,
the rate of increase in spending dropped appreciably, to about 2
percent a year.* Nevertheless, spending levels were so high that
the defense establishment was able to continue to modernize its
forces and to enhance substantially its military capabilities.
Between 1976 and 1983, the Soviets purchased 1,100 ICBMs and more
than 700 SLBMs for their arsenal of strategic forces, even while
they were adhering to the SALT II restrictions and spending in
this category was declining. At the same time, they added about
300 bombers and 5,000 fighters, including the MIG-23/27 Flogger
fighter and a new version of the Backfire bomber. Modernization
of ground forces continued by introducing more sophisticated
* Unless specifically stated, all defense spending growth rates
are measured in constant 1970 rubles.
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armament. Some new models of self-propelled artillery, for
example, were nuclear capable, and 15,500 new tanks were added to
the forces, including the costly T-72 and improved 1=64 tanks.
Finally, the buildup of the Soviet navy continued. During this
period, the Soviets added 33 major surface combatants, 15
nuclear-powered ballistic missile submarines, and 71 attack
submarines.
Despite the scale of the ongoing Soviet defense programs,
the growth of spending did slow. Its impact can be seen by
reviewing trends in the outlays of military services and by
trends in major resource categories (procurement, construction,
personnel, O&M, and RDT&E). Military service expenditures
provide insights into competition among conflicting military
interests in a period of slower growth in defense (figure 8).*
The most striking feature of service spending trends is that all
services, including the command and support function, shared in
the reduced growth in spending. Before 1976, total outlays of
the services increased by 3-5 percent annually. Starting in
1977, however, the rate of growth of total spending in all the
services decreased substantially. Some services were hit harder
than others. For example, total outlays for Strategic Rocket
Forces grew by 4 percent per year during 1966-76, but fell by
more than 5 percent per year after 1977. Spending on Air Defense
also declined in absolute terms. The growth in outlays on the
* Because we cannot allocate RDT&E costs among the services, the
following analysis measures service shares of total spending less
RDT&E. "National command and support functions" tends to be a
catchall category and is also not included in this breakout.
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remaining services declined from 3-5 percent per year in 1966-76
to 1-3 percent annually after 1977.
Trends in resource category spending before and-after 1976
(figure 9) demonstrate that the main source of slower growth in
defense spending was a stagnation in spending for military
procurement after 1976. Year-by-year estimates of the level of
total defense spending and outlays for procurement since 1965
(figure 10) confirm this judgment.
Could we be wrong about the procurement slowdown? This is a
reasonable question that has been raised, in part because our
building block (item-by-item) approach toward estimating
procurement is obviously subject to uncertainty. We have audited
our results to examine three possible sources of uncertainty:
military production estimates; the cost of the new sophisticated
Soviet weapons systems relative to costs of older systems; and
possible increases in the real cost of defense production caused
by declining productivity since the mid-1970s, which means more
resources might have been required to produce the same product.
Based on this audit we have reasonable confidence in our
estimates of the level and trend of Soviet military procurement.
-- We have considerable confidence in our production
estimates for large programs, which make up the bulk of
procurement.
-- We found that actual prices for the most expensive and
complex systems would have to be twice our present estimate
to raise procurement growth back to pre-1976 trends. We do
not believe we could be this far off.
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-- Productivity changes in Soviet industry were not
significant enough to
alter our
judgment about recent
procurement trends.
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Smaller increases in
spending in
the other categories of
Soviet military programs, however, also contributed to slower
growth in defense spending. After 1976, the estimated cost of
operations and maintenance grew about half as rapidly as before
the slowdown. Since 1976, the main driver of defense spending
has been the estimated 6-7 percent per year growth in RDT&E; in
the earlier period, procurement had been the leading source of
growth.
The Procurement Slowdown
Why did Soviet procurement stop growing after 1976? Many
explanations have been offered, including policy decisions,
technical difficulties, manufacturing constraints, and industrial
bottlenecks. But there is still disagreement as to whether one
factor dominated or even if the list is complete.
Policy decisions. We would note that the stagnation in the
level of procurement has now lasted for 7 years--from 1977 to
1983. This plateau has arguably lasted too long to be the result
exclusively of bottlenecks or technological problems. In a
period so long, the leadership of the Soviet Union could have
used its control of industrial priorities to ensure a higher rate
of growth of military procurement. Older-generation weapons
could have been kept in production while problems with new
systems were ironed out, or once the problems were overcome, the
new systems could have been produced at catchup rates. We
believe they chose to pursue neither alternative.
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In deciding to hold procurement growth down the Soviet
leadership in the mid-1970s may have viewed the external threat
as manageable and the existing high level of procurement as
enough, possibly recognizing that the USSR was entering a period
of generally slower economic growth and counting on a
continuation of the decline in US military spending. But even if
decision was made to put a temporary though high cap on
procurement--and we want to emphasize we have no direct
this is so--other factors clearly played a supporting
a policy
military
evidence
role.
Technical Difficulties. Modern Soviet weapons embody ever
higher levels of technology, and there is evidence that the
Soviets have experienced some difficulty, particularly in the R&D
phase, in solving technological problems encountered in producing
new weapons. Although problems in design or on the test ranges
are nothing new, some of the delays encountered during this
period were prolonged and may have contributed to the procurement
slowdown.
Manufacturing Constraints. Even after production of new
weapons has begun, the Soviets have encountered delays in
achieving a high level of serial production of some high
technology weapons systems in recent years. These delays would
reduce the rate of growth of military procurement below the level
planned.
Industrial Bottlenecks. The shortages of key materials and
transportation problems that affected much of Soviet industry
since the 1970s clearly also affected defense. Soviet industrial
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growth as a whole has been slower since 1975 than in the past.
Despite the traditional priority accorded to defense it has
become more difficult
disruptions.
Defense Spending
to isolate defense from these economic
During the Recovery
What can we say about defense spending in 1983? Our
preliminary estimates for 1983 suggest that procurement is higher
in 1983 than in 1982, growing at a rate of 2-3 percent. The
upturn is largely the result of a projected 11-percent increase
in construction of ships and boats, mainly the Delta and Typhoon
SSBN submarines, and a projected 5-percent
missiles.
Our conclusions are tentative because
increase in
of the difficulty we
have in estimating the distribution through time of the costs of
systems that are built over several years. The phasing problem
is a particular problem for recent years like 1983 because it
involves judgments about new systems that we think will be
deployed in the future but for which the lead costs must be
phased back to the present. Estimates of missiles andships are
especially influenced by the lead costs of weapons that have not
yet come on stream. If the system
reduced level, or is stretched out
current estimates for 1983 will be
is never deployed, enters at a
longer than expected, then our
revised downwards. This has
been our experience in recent years.
What interpretation should then be placed on the higher
apparent growth of procurement in 1983? One possibility is that
this figure will be revised downwards as we collect more
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information about the pace of weapons production in 1984 and
1985. This happened to our 1982 procurement estimate when we did
the update this year. Another interpretation is that this growth
lies within the range of the year-to-year fluctuations of the
previous six years and does not signify a new trend. A third
possibility is that this estimate is sufficiently above the
average of the last six years to be an early indicator of a
return to more rapid growth. Another year of data is required
before we can choose among these interpretations.
Investment
While defense has been maintaining its place as a claimant
on Soviet production, new fixed capital investment--annual
outlays for plant and equipment--has absorbed a rising share of
GNP in the 1981-85 Plan period. Investment increased at an
average annual rate of more than 4 percent during 1981-83, and
the economic plan calls for an increase of 3.9 percent this
year. Since investment has been running well ahead of plan each
year, the actual increase in investment in 1984 could be even
greater. Assuming that the 1984 target is reached or exceeded
and that new fixed investment grows by 4 percent in 1985--about
the 1981-84 average--investment in the first half of the decade
would rise by roughly 20 percent compared with 1976-80, almost
double the planned growth of 10.4 percent.
The 1981-85 Plan had called for slower growth in investment
than in overall economic growth. The slowdown in investment
growth planned--the lowest in Soviet post-war history--was
predicated on the assumption that offsetting increases in capital
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(and labor) productivity would stimulate growth in GNP and in
individual sectors of the economy.
-- Plans for building new facilities were pruned, and
construction activity was refocused on renovating existing
structures.
-- Existing machinery was to be replaced more rapidly by
new, technologically advanced equipment as the primary means
of introducing new technology into the economy.
At the same time, inventories of unfinished construction were to
be markedly reduced in order to maintain the annual flow of new
production capacity brought on line. Indeed, the commissioning
of new capacity was targeted to rise by an average of almost 4
percent a year.
As we noted in our testimony last year, this investment
policy apparently was abandoned by the leadership from the very
outset of the 11th Five-Year Plan. Investment has been
accelerated markedly in order to provide more balance between
renovation and reconstruction of existing facilities--the
cornerstone of the original plan--and expansion of existing
facilities and the building of new ones. During 1981-83, for
example, state expenditures on the reconstruction of the
"productive" capital stock grew by about 6-1/2 percent a year
while state spending on construction of new "productive"
facilities increased by approximately 4-1/2 percent a year.
As far as the allocation of investment thus far in the 11th
FYP is concerned, investment in industry has increased by
slightly more than 4 percent a year on average. The fuel and
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power branches have absorbed the largest share--more than one-
third of industrial investment during 1981-83. Investment in the
oil industry has grown particularly rapidly--by more-than 10
percent per year.
Investment in the machinebuilding sector has risen by less
than 4 percent a year. This is a vitally important sector of
Soviet industry; it produces defense hardware for the military,
durable goods for the consumer, and machinery for investment.
Because the modernization of the machinery sector has lagged, it
is not producing the quantity, and more importantly the quality,
of equipment required to refurbish Soviet industrial
facilities. Indeed, some Soviet experts argue that the rise in
capital-output ratios in the USSR will not be arrested until the
technological level of Soviet machinery is raised substantially
and on a continuing basis.
Meanwhile, the share of investment going directly to
agriculture has remained about 27 percent. Investment in the
railroads has been flat since 1981 even though rail freight
transport has been a major bottleneck in the economy.
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USSR: Average Annual Percentage Growth in New Fixed Investment
Actual
1981-83 1981-85 Plan
Total investment 4.4 1.6
Industry 4.1 4.2a
Fuels and power 6.5 8.7a
Ferrous metals 5.6 5.4a
MBMW 3.8 3.4a
Agriculture 2.5 1.4a
Transportation and
communications 5.5 NA
Construction 3.0 NA
a Estimated.
Consumption
Consumption has grown at a rate only slightly less than that
of GNP during the current five-year plan period except for 1982
when it grew much more slowly than GNP. This year official
Soviet data imply an increase in consumption (about 4 percent) in
excess of GNP growth.
General Secretary Chernenko, like Andropov before him, has
shown concern for the welfare of the population in investment
allocations, program proposals, and import decisions, but in
public statements both leaders were careful not to raise consumer
expectations too much. They played down the material aspects of
consumption while still stressing the link between increases in
income and labor productivity.
The regime is trying to reduce the imbalances between demand
and supply of individual consumer goods that have made persistent
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shortages and rationing--formal and informal--a way of life in
the USSR. The growth of personal incomes has been restrained to
bring wages more in line with the availability of consumer
goods. Average wages increased about 2.5 percent a year during
1981-83 compared with 3 percent during 1976-80 and 3.6 percent in
1971-75.
The regime also is taking steps to increase supplies of food
and nonfood consumer goods, housing, and consumer services. To
increase the availability of quality foods Moscow is (1) banking
on a quick payoff from the Food Program to increase domestic
production of agricultural products and (2) continuing to import
large quantities of agricultural products. More than $9 billion
of hard currency--about one-third of Moscow's total hard currency
receipts--were spent in 1983 on agricultural imports. The
Kremlin also is trying to spur domestic production of consumer
goods, although improvement in this area has been slow or even
negligible, and is continuing to import large quantities of
nonfoot consumer goods. About $11 billion worth of such goods
were purchased abroad last year--almost 60 percent from Eastern
Europe. In internal prices these accounted for a substantial
share of retail sales of nonfood consumer goods--about 10-15
percent. As a result of these policies, retail trade turnover,
which had been stagnant in 1982, increased in real terms by about
3 percent in 1983. Based on statistics for the first six months
of 1984, growth in retail turnover may be even faster this
year.
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The Soviets also have stepped up construction of new
housing. The 112.4 million square meters of housing constructed
in 1983 represents the largest yearly increase in hottsing
construction in more than two decades. In addition, a flurry of
party-government resolutions in recent years have called for
improvements in the consumer services area--expansion of repair
and cleaning shops, more personal services, and the establishment
of more convenient shopping hours in the service sector.
Still, consumption levels in the USSR have risen only slowly
in the 1980s. Per capita consumption, for instance, dropped in
1982 and increased by only about 1-1/2 percent in 1983.
Certainly the regime has a considerable distance to go in
eliminating the disequilibria plaguing consumer markets and in
providing more adequate incentives for workers. This will not be
accomplished, we think, until the leadership is willing to
restructure retail prices and bring the mix of products produced
into greater conformity with demand and is able to provide the
population with more substantial and continuing increases in the
supply of quality food, housing, and personal services.
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USSR: Annual
Growth of Per Capita Consumption
(percent in established
1971-75 1976-80 1981 1982
prices)
1983
Total consumption
per capita
2.9
2.1
1.9
-0.6
1.4
Consumer goods
2.8
2.0
2.0
-1.2
1.2
Food
1.6
0.8
0.7
-0.6
1.8
Soft goods
3.0
3.1
2.4
-1.5
0.7
Durables
10.0
5.4
6.4
-2.7
-0.3
Consumer services
3.0
2.3
1.7
1.52.2
Reasons for the Improved Economic Performance
Ordinarily, we might have expected Soviet leaders to be
enthusiastic about the results of the last two years, but their
reaction has been restrained. This unusual reticence reinforces
our caution in assessing the recovery. The lack of euphoria on
the part of the Soviets can perhaps be better understood by
looking at the trends in the level of output since 1975 rather
than growth rates.
From 1976 to 1978, Soviet industry recorded unprecedentedly
low rates of growth. At the time we believed this development
reflected serious economic difficulties even though a
continuation of those basic trends would still have output in
1984 some 40 percent above the 1975 level. From 1979 to 1982,
industrial growth slowed even more, opening a gap between actual
achievements and the then historically slow 1976-78 trend. The
1983-84 recovery put industry back on its 1976-78 growth path,
but left it substantially below the level that could have been
reached if the Soviet growth recession had not occurred. Still,
the question remains, why has measured economic growth turned up
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after several years of mediocre
performance?
We
have considered
a number of possible explanations.
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The Recovery As A Statistical
Anomaly?
Our estimates of Soviet economic performance in 1983 and
1984 are preliminary. The statistics for 1983 are subject to
change and the size of the sample for 1984 will increase
considerably next year when we have access to a larger volume of
information. Often the early sample exaggerates the growth rate
because it relies on press reports that tend to emphasize the
positive features of economic performance. As more data become
available, we expand our sample and revise our estimates
accordingly. A good example of this happened recently. We had
been carrying an estimate for the growth of production of
processed foods for 1983 as 5 percent, but a reassessment this
fall lowered that figure to 2.9 percent. While we do not expect
large changes in every part of the economy, further revisions may
reduce the measured extent of the recovery.
Restoration of Balance
In the late 1970s, a lack of balance in Soviet industrial
development became increasingly apparent. Shortages of
industrial materials and energy pushed down capacity utilization
rates. Then, the economy suffered two severe shocks from
extremely harsh winters in 1978-1979 and 1981-1982. Plants were
idled while waiting for raw materials to be produced and
shipped. The cold weather increased the demand for fuels and
electric power. In factories, choices had to be made whether to
slash output and keep energy use constant or maintain output and
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accept disproportionate increases in energy use. In some
locations, electric power stations were forced to reduce the
amount of power they supplied.
Unusually extreme winter weather also snarled the
transportation network, further complicating the shipping of
products to their ultimate destination. These effects spilled
over into other sectors, as their supplies of raw and
intermediate materials dwindled, and hampered production of
several commodities, some of which suffered unprecedented
declines in the level of output. In turn these large shortfalls
created other imbalances which further disrupted the economy.
The regime began to focus on these bottlenecks early in the
1981-85 Plan. In 1983 and 1984, the process gained momentum.
Transportation benefited from fewer weather-related interruptions
and decreased demand for freight cars to support activities
related to the invasion of Afghanistan and efforts to deal with
the crisis in Poland. Shortages of ferrous and nonferrous metals
also eased. With more reliable transportation, better
performance in the raw materials sector, and more dependable
supplies of electric power, production of steel, chemicals, and
construction materials was able to rebound. Just as the effects
of bottlenecks had spread throughout the economy during the poor
years, so breaking them produced the opposite effect.
Productivity Growth
The economic acceleration in the past two years has not been
the result of faster growth in the supply of labor or fixed
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capital. Rather, it has reflected improvements in
productivity. The combined productivity of labor and capital in
nonagricultural sectors, which had declined by 1.3 percent a year
in 1979-82, levelled out at -0.4 percent in 1983 and may be
increasing in 1984.
The breaking of bottlenecks and improved supplies of raw
materials helped on the productivity front by permitting a more
complete utilization of the capital stock and labor force. Other
factors have been at play, however. For example, Andropov's
discipline campaign (discussed below) probably had an appreciable
effect. If, for example, the campaign managed to reduce average
absenteeism by only one-half hour per week, labor productivity
(as measured by output per worker) would have been raised by one
percent, provided that the necessary raw and intermediate
materials were available. Improvements in the supply of consumer
goods may also have boosted worker morale and productivity by
reducing the time spent off-the-job in queues to purchase
consumer goods or by simply increasing incentives.
Policy Decisions
Whatever the reason for the continued restraint on military
procurement, it did give the economy some breathing space. A
continuation of procurement growth at its historical rate after
1976 would have raised the level of procurement by 25 percent and
the defense burden by at least one percentage point (figure
10). The resources used for investment are the ones that are
most substitutable for procurement. If the resources were
diverted entirely from investment, the rate of investment growth
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would have fallen by as much as two percentage points a year.
The stagnation in procurement permitted the leadership to raise
Investment above the levels originally planned for 1981-85.
Continued growth in military procurement would not only have
hampered investment; it would have increased demand for the
products of those industries that were finding it hard to expand
output. The effects of an increase in procurement spread across
the economy as inputs--both direct and indirect--must be provided
to accommodate it. In particular, metallurgy, machinery,
electric power, and fuels would have to devote a larger share of
their output to supporting defense. (We should note, however,
that increased investment, especially in machinery production,
will pay dividends in terms of long range military procurement.)
Outlook
In sum, we think that economic pressures have eased somewhat
in the USSR during the past two years. To recapitulate, the
better economic performance was due to:
Better weather, which helped boost farm output and
industrial production and ease snarls in rail transport;
Relief from the shortages of raw materials that had been
severely constraining industrial production;
Increases in hours actually worked per day and greater
utilization of production capacity; and
Greater efficiency resulting from more effective
management and, perhaps, an improvement in worker
morale.
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The Near Term
Can the Soviet economy's better showing be sustained in the
years ahead? In our judgment, the recent upswing in-GNP growth
could continue for another year or two. This would require
continued improvement in some of the same factors that have been
responsible for the better performance in the last two years,
especially increases in actual hours worked and further relief
from bottlenecks.
Whether the labor discipline campaign has run its course is
a major uncertainty in near-term projections. Because of the
prevalence of long lines at markets and the difficulties
encountered in obtaining many goods, Soviet workers frequently
spent part of the working day away from the job shopping.
Drunkenness at work also is a serious problem. The campaign
introduced by Yuri Andropov in late 1982 was intended to prevent
such violation of work rules, to enforce tighter discipline in
management, and to punish corruption. One of Andropov's first
acts, in fact, after taking office was to fire some allegedly
corrupt or incompetent officials. The Minister of the Railways,
for instance, was summarily dismissed within weeks of Brezhnev's
death.
General Secretary Chernenko has followed Andropov's lead in
stressing the need to maintain labor discipline. In a recent
speech he underlined the importance of increasing discipline,
ending "parasitism," and eliminating alcoholism. He pointed out
that increased discipline had produced an "immediate and
noticeable" improvement in production and in conserving
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resources. Chernenko also appears to be continuing the crackdown
on corruption. This past July, in fact, a former manager of
Moscow's most prestigious food store was executed by a firing
squad for "illegal speculation" in consumer goods.
We are skeptical that the campaign actually has made people
work significantly harder, although it apparently has succeeded
in forcing people to spend more time on the job. Nonetheless,
even if Chernenko matches Andropov's zeal for discipline and
cracking down on corruption, the discipline campaign offers only
temporary assistance in raising productivity in the economy.
Without more stringent application, the impact of the discipline
campaign will weaken. There are, in fact, indications that the
campaign has begun to wind down; the crackdown on people who,
contrary to law, offer merchandise for private sale has abated as
has the police campaign to check on people absent from work.
Further progress in eliminating adverse bottlenecks in the
economywon'tcomeeasyeither.Therailroads,forinstance,
continue to operate at near-maximum capacity, and serious freight
transport snarls could resurface at any time.
On balance, underlying trends suggest that GNP growth the
next year or two will remain in the 2-3 percent range. This
estimate reflects primarily a judgment that industry and other
key sectors outside of agriculture will continue their improved
performance of the last two years. Because year-to-year
movements in GNP depend heavily on agricultural output, which, in
turn, depends so heavily on the weather, growth in a particular
year could even be outside of this range if the weather is
unusually good or bad.
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? .
Longer Run
The stronger showing in 1983 and 1984, even if it continues
another year or two, would not in our view foreshadow a higher
growth rate over the longer term unless Moscow begins to take
effective steps to remove the inherent inefficiencies of the
Soviet economic system. The primary sources of improved growth
in recent years will not overcome the more fundamental problems
that have pulled economic growth down in the Soviet Union since
the mid-1970s.
Slower Growth in Labor and Capital. Additions to the
working-age population have been falling since the mid-1970s
because of the lower birth rates of the 1960s, an increase in the
number of workers reaching retirement age, and a rising mortality
rate among males in the 25- to -44 age range. These increments
will be lower in the next several years than at any time in the
last several decades. In fact, they will be less than one-third
of the annual additions to the work force in the first half of
the 1970s.
Growth of the Soviet capital stock has also slowed, although
less than we previously expected because of the faster-than-
planned growth in investment and some success in holding down the
growth of unfinished construction. The value of the stock of
fixed capital in the Soviet economy increased by slightly more
than 6 percent per year during 1981-83, compared with 8 percent
in the first half of the 1970s and 7 percent in 1976-80. A more
pressing problem has been an inability to employ capital assets
more effectively and a failure to embody more modern technology
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in new capacity being brought on line. A large part of the
Soviet capital stock is old and obsolete. One Soviet author
estimates, for instance, that 30 to 40 percent of all- equipment
now in operation in the USSR has been in use for 15-20 years or
more.
Rising Costs of Industrial and Agricultural Raw Materials.
Even though the Soviet Union is endowed with enormous quantities
and a wide variety of raw materials, these materials in many
instances have become increasingly inaccessible and the cost of
exploiting them has risen sharply:
The economy has become more dependent on Siberia for
fuels and other raw materials. Developing these new
areas requires large capital investments, particularly in
construction.
Most of the new areas require social overhead capital--
roads, housing, cultural, and service facilities--in
addition to the basic facilities for exploration and
exploitation.
The declining quality of readily available raw materials
has pushed up capital requirements because of the cost of
enriching poor-grade minerals and ores.
If oil and coal production does not begin to increase again
energy supplies will remain taut and spot shortages of the sort
experienced in recent years will continue.
Agriculture and its supporting industries currently preempt
about one-third of total Soviet investment, one-fourth of hard
currency earnings, and require growing subsidies to maintain
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stable food prices. A number of factors will continue to sap
productivity in the farm sector in the years ahead.
Until the leadership eliminates output quotas-, revises
the success indicator system, and stops interfering in
day-to-day operations, farm production will be plagued by
high costs and low productivity.
The relatively slow pace of industrial growth in the
second half of the decade will limit the support industry
can give to agriculture unless the planners give the Food
Program very high and continuing priority.
The renewed commitment to land relamation at the October
Plenum on agriculture suggests that a considerable part
of farm investment will have long-delayed and uncertain
returns if past experience with these programs is a
reliable guide.
Technical progress in farm production will occur slowly
because of inadequate incentives and poor support from
I ndustry.
Shortages of younger, skilled workers will persist in
many regions until there are major improvements in rural
living conditions and an upturn in annual increments to
the general labor force.
Systemic Problems. Economic growth will also be held back
by the USSR's highly centralized system of planning and
management. As the Soviet economy has grown in size and
complexity, it has become more and more difficult to manage from
the center. Moreover, a perverse system of incentives promotes
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inefficient behavior by enterprise managers and dampens the
introduction of new technology into the economy.
The inflexible Soviet system contributes to thetr
technological backwardness. The gap between the USSR and
developed western countries continues to grow in technologies not
directly confined to weapon systems. The Soviets have been
particularly unsuccessful in stimulating advance in the
technologies that underlie the resurgence of western productivity
growth--microelectronics, computers, robotics, and advanced
materials. They concentrate on copying western developments, and
only a massive program for acquiring western technology has
prevented them from falling further behind.
Indeed, the greatest potential for economic gain in the USSR
over the longer term probably lies in economic reform. However,
true reform--that is a major restructuring of the Soviet economy
to include greater use of markets--is not likely. The political
elite strongly oppose full-scale marketization because they fear
it would lessen party authority and control. Most policy
advisers in the Soviet Union do not believe it would be the right
solution even if it were politically feasible. Soviet leaders
not only view centralized planning as being mandated by "Marxism-
Leninism"; they see it as being responsible for elevating the
USSR to world superpower status.
Certainly nothing in Chernenko's background or past
pronouncements indicates an inclination toward bold systemic
change that would significantly reduce centralized planning and
management. After almost a year in office the General Secretary
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has not put forward a clear-cut economic strategy let alone any
new initiatives in the area of economic reform. He has largely
carried over the programs of the previous administration which
focus on seeking modest improvements in the system of incentives
and performance indicators.
The most important of the "new" programs carried over from
the Andropov regime is the "economic experiment" introduced in
January 1984 in two All-Union and three republic-level industrial
ministries. The experiment gives enterprises managers more
latitude in using investment and wage funds, reduces the number
of success indicators (making contract fulfillment the key
indicator), increases the role of production associations and
enterprises in drafting plans, and ties worker benefits and
managerial bonuses more closely to enterprise performance.
Soviet planning officials have characterized the experiment as a
"strategic study" or "proving ground" for measures to be
introduced throughout the economy as a whole. Those innovations
that "justify" themselves during a two-year experimental period--
1984-85--will be adopted on a national scale for the 12th Five-
Year Plan (1986-90).
The Soviet leadershjp has already expressed satisfaction
with preliminary results of the experiment and has announced
plans to expand it to include enterprises in six new All-Union
and twenty new republic level ministries. (Participating
industries will then account for 15 percent of industrial
production.) According to Soviet officials, there has been
substantial improvement in fulfillment of contracted sales
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obligations, product quality and productivity, reduction of
production costs, and more rapid introduction of technological
innovation in those enterprises participating in the
experiment.
Nonetheless, a steady undercurrent of skepticism and
criticism of the experiment appears to be building among Soviet
economists and government officials and even factory managers.
One Soviet economist, for instance, has questioned the
effectiveness of the new measures in ensuring contract deliveries
and has suggested that there will be even larger problems in
extending the experiment to the entire economy. The noted Soviet
economist, A.N. Aganbegyan, director of the Novosibirsk Institute
of Economics of the USSR Academy of Sciences, said recently that
incentives provided under the experiment have had little, if any,
effect on the productivity of the average worker.
More generally, economists at the Novosibirsk Institute have
termed the achievements of the experiment during the first seven
months "modest". Enterprise managers have complained that
despite the stipulations that they be given a larger role in the
planning process and that plans remain stable over a 5-year
period, their submissions have been largely ignored and plans are
still frequently changed. Our own assessment is that the
experiment is too limited to have much potential for improving
industrial performance and that the success reported so far is
largely the result of the priority given to the participants in
receiving supplies of labor and materials.
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Foreign Trade as a Spur to Economic Growth
The Soviet economy would certainly benefit from continued or
increased access to Western goods.
Large quantities of farm products will be required to
support the livestock program and to keep per capita
consumption of quality foods at present levels.
Imports of industrial materials such as phosphate
materials and other specialty chemicals, ferrous metal
ores, and alloying materials would prevent or alleviate
bottlenecks that could constrain industrial production.
More and more modern machinery and equipment is badly
needed to help modernize industry and to carry out
Moscow's investment policy calling for the renovation and
reconstruction of existing production facilities.
Significant amounts of construction and
equipment also may have to be imported.
The Soviet need for imported capital goods
transportation
will be most
pressing and the potential payoff the greatest in the energy
sector. During the remainder of the 1980s, the cost and pace of
certain phases of Soviet energy development will depend
substantially on the level of imports of Western oil and gas
equipment and know-how. Soviet interest in imports of Western
equipment and technology should increase as exploration and
development shifts to deeper and more complex onshore deposits,
especially as exploitation of the deep sulfurous petroleum
deposits in the Pre-Caspian Depression and Central Asia
proceeds. Exploration and development of Arctic offshore
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deposits in the Barents and Kara Seas would also be helped by
Western equipment and technology. The pace of Arctic offshore
development will depend on the degree to which the Soviets are
willing to permit major Western firms to man and manage
operations and, possibly, on the availability of Western
financing of project costs measured in tens of billions of
dollars.
Still, we do not believe that the Kremlin can rely much on
increased imports to avoid resource pressures in the domestic
economy during this decade. Our projections indicate that--
barring another round of spiraling oil prices--Soviet hard
currency purchasing power will not rise significantly through
1990. Consequently the USSR will have difficulty financing more
than modest growth in hard currency imports unless it is willing
to accept a sharp increase in its debt. Western credits are
one--and a relatively immediate--means of financing additional
hard currency imports. But Soviet debt management policy would
first have to become less conservative, and Western governments
would have to provide significantly greater encouragement and
guarantees to Western banks. If Moscow were willing to rely more
on Western loans to buy equipment and technology--as it did in
the early and mid-1970s--the benefits would be sizable. For
example, if Moscow had adopted a less restrictive borrowing
policy during 1981-83--perhaps allowing a doubling of equipment
imports from the West--the machinery component of new fixed
investment would have increased by about 10 percent annually
compared with the 5-percent annual growth actually attained.
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The Soviets, however, appear reluctant to step up overall
imports from the West on political grounds. The recent credit
and trade embargoes have persuaded Moscow that becoming too
dependent on the West is dangerous. Imported Western plant and
equipment, moreover, has fallen short of its potential for
improving the USSR's overall economic performance because of
problems in assimilating and diffusing Western technology.
Moscow could attempt to squeeze more out of Eastern Europe
by pressuring Warsaw Pact allies to reduce t'heir deficits on
bilateral trade with the USSR in the second half of the 1980s and
to boost their exports--especially those of higher quality
goods--to the Soviet Union. In fact, the Soviets now appear more
willing to lean on Eastern Europe than they have in the past.
The Soviets are envious, even resentful, of the higher
standard of living in most East European countries than
in the USSR.
Moscow is probably confident that social order can be
maintained. Martial law has effectively controlled
tensions in Poland, and there has been little overt
discontent in any of the East European countries despite
harder economic times.
The regime probably believes that the East European
nations could compensate for increased Soviet demands by
cutting down waste and inefficiency in their economies.
We don't believe, however, that the Kremlin will have much
success in reducing net exports to Eastern Europe. Most East
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European countries are struggling to sustain some positive
economic growth of their own while putting their hard currency
balances in order. Moreover, the technological level of most
East European finished goods is still below that of the West.
Overall Long Term Assessment
All things considered, we believe Soviet economic growth
will average 1.5-2.5 percent per year in the second half of the
1980s. If the low end of the range is to be avoided, capital
investment will have to continue to increase at above-plan rates
(as seems likely), weather conditions for agriculture will have
to approximate the 1960-83 average, and Moscow must succeed in
implementing plans for fuel conservation and fuel substitution.
Energy shortages are not likely to be a major hindrance to growth
of GNP this decade unless the oil sector goes rapidly downhill--a
point that was emphasized in last year's testimony. In fact, the
Soviets appear to have had some success in slowing the rate of
growth of energy consumption relative to GNP.
To reach or exceed the high end of the GNP growth range the
USSR would have to achieve productivity gains like those recorded
in the late 1960s and early 1970s. Until 1983, combined
productivity of inputs of labor, capital, and land had been
falling for over a decade--as the tabulation below shows. Our
judgment is that the USSR will not be able to reverse this trend
over the next several years. Soviet policymakers have not
adopted the changes in investment policy or in economic
management that might arrest the long-established decline in
factor productivity.
Al
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USSR: Growth of Factor Productivity
(average annual percentage change)
1966-70 1971-75 1976-80 1981-82 1983
GNP 5.3 3.7 2.6 2.1 3.2
Inputs of labor and capital 4.1 4.2 3.5 3.1 3.0
Factor productivity 1.1 -0.5 -0.8 -1.0 0.1
Policy Implications
Domestic Policy
Moscow's room for maneuver in resource allocation among
military and civilian claimants in the second half of 1980s will
be severely limited. Admittedly, it is difficult to speculate on
what they will do because the Soviets have released little
information about their plans and policies for 1986-90. We do
know, however, that the Soviet leaders have already adopted two
expensive programs as part of the 12th FYP--the Food Program and
a long-term Energy Program. The cost of the Food Program could
run as high as 265 billion rubles--suggesting that agriculture's
priority will not be decreased. Indeed, at a recent special
Party Plenum devoted to agriculture, Chernenko announced
increased output and investment goals for land reclamation,
calling success of the Food Program critical to the leadership's
effort to raise consumer welfare and productivity. Investment in
energy also is likely to be an enormous drain. At a minimum, we
expect investment in the energy complex to total 170 billion
rubles, an increase of 28 percent over planned investment in
1981-85. Although the Soviets have announced no official target
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for total investment during the 12th FYP, one high level Soviet
planner informally told
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Investment will continue to increase at the current rate of
growth--about 4 percent per year. Anything less--assuming they
go ahead with the Food and Energy Programs--would put a severe
crimp in the amount of investment resources available for other
areas essential for future economic growth, such as
machinebuilding and transportation.
In our judgment, the leadership will probably attempt a
precariously balanced policy of at least some growth in living
standards and increasing allocations for new plant and equipment
combined with some growth of military procurement. Certainly the
pressure to step up defense procurement must be intense given the
state of Soviet-American relations and the recent increases in US
spending on military hardware. But a decision on increasing the
rate of growth of defense spending has to be a tough one, not so
much because of the impact it would have on overall economic
growth but because of the implications for Soviet society. Our
analysis indicates, for instance, that at current rates of
investment even with defense growing at our present estimate of 2
percent a year, per capita consumption would grow by only 1-1.5
percent annually during 1986-90. Accelerating defense spending
to a rate of 5 percent a year--a rate approximating the 4 to 5
percent growth observed during 1966-76--would jeopardize Soviet
prospects for anything but minimal improvements in consumption
levels.
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Sluggish improvement in living standards over a prolonged
period would not sit well with the Soviet population. At a
minimum it could erode recent
even provoke a crisis between
continued over a long period.
It is important to note,
gains in productivity._ It could
the regime and Soviet society if it
however, that even if defense
spending growth is not increased during 1986-90 and overall
economic growth is in the 2-2.5 percent range, the Soviets could
continue to deploy major weapon programs and modernize their
forces. Important programs in development that could still be
deployed through the early 1990s include several military space
systems, strategic cruise missiles, another generation of
strategic ballistic missiles, a strategic bomber, a large
transport aircraft, and a large carrier for conventional
aircraft.
Foreign Policy
Continued slow economic growth in the range indicated is
unlikely to result in major changes in Soviet foreign policy. We
do not see economic problems at home motivating the leadership to
undertake high-risk adventures abroad that are designed to
distract an unhappy public or produce economically beneficial
geo-strategic breakthroughs. Nor, on the other hand, would a
continuing economic slowdown be likely to significantly constrain
Soviet political and military activity in the Third World.
Eastern Europe. An economic slowdown would have its most
serious external impact on relations between the USSR and its
client regimes in Eastern Europe, which currently receive most of
All
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Soviet economic and military aid. To achieve the levels of GNP
growth and per capita consumption we have projected by 1990, for
instance, Moscow may have to impose cuts in oil deliveries to
Eastern Europe beyond those already levied. Reductions in raw
materials deliveries from the USSR are also possible. Measures
such as these could cause new political and economic
develop between Moscow and its East European allies.
Relations with the Third World. A continuation
strains to
of the
slowdown in economic growth would be a factor affecting Soviet
policy toward the Third World, although it would be of less
importance than military and geopolitical considerations. In
general, Moscow is likely to become more tightfisted in giving
economic assistance. However, exceptions are likely to continue
to be made to this policy in the case of Cuba, Vietnam, and
Afghanistan where political and military-strategic factors
outweigh economic considerations, but where the USSR incurs most
of its Third World economic burden.
Bilateral US-USSR Relations. Although we don't believe that
Moscow can rely much on increased imports to avoid resource
pressures on the domestic economy, economic difficulties will
give the Soviets a continuing incentive to obtain US grain and
state-of-the-art technology in such key areas as energy,
agricultural technology, and machine tools. The robust outlook
for global grain production over the next few years suggests that
in years of average harvests the Soviets will have only a limited
need for purchases from the United States above the Long-Term
Grain Agreement minimum commitment of 8 to 9 million tons.
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Therefore, US grain-based political leverage is likely to be
quite limited. Nonetheless, Moscow will still find the United
States attractive as a supplier because of its unique year-around
capacity to deliver large volumes of grain quickly--especially
corn--at short notice.
As noted above, large-scale US assistance would be helpful
to Moscow in maintaining oil output and developing Arctic
offshore resources. Whether this degree of technological
dependence on a narrow range of US equipment--particularly high-
capacity submersible pumps and offshore equipment--translates
into much political leverage for the United States is doubtful.
Soviet willingness to accommodate US political interests in
return for assistance in oil production would be questionable in
any event and would depend greatly upon Moscow's assessment of
the overall state of US-USSR relations.
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Table 1:
Table 2:
Table 3:
Table 4:
Table 5:
Table 6:
Table 7:
Table 8:
Table 9:
Table 10:
Table 11:
Table 12:
Table 13:
Table 14:
Table 15:
JEC Briefing Paper
Appendix A
List of Tables
USSR: GNP by Sector of Origin at Factor Cost
USSR: GNP by End Use at Factor Cost
?
USSR: Value Added in Industry at Factor Cost
United States and USSR: Production of Selected
Commodities in Selected Years
USSR: Selected Indicators of Agricultural Output
USSR: Freight Turnover by Transport Mode
USSR: Estimated Hard Currency Balance of Payments
USSR: Estimated Hard Currency Debt to the West
USSR: Foreign Trade by Major Region
USSR: Per-Capita Annual Growth of Components of
Consumption
United States and USSR: Production of Selected
Consumer Goods
USSR:
USSR:
USSR:
Average Annual Employment by Sector
Gross Fixed Capital Investment
Growth of GNP and Factor Productivity
USSR: Growth of Industrial Output and Factor
Productivity
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Table 1
USSR: GNP by Sector of Origin at Factor Cost*
(billion 1970 rubles)
1970
1975
1978
1980
1981
1982
1983
GNP**
383.3
459.8
513.4
522.9
533.1
546.3
563.7
Industry
122.6
163.2
182.4
191.2
195.7
200.2
207.0
Agriculture
81.0
72.0
85.9
73.9
73.2
78.1
83.1
Construction
28.0
36.8
40.1
40.4
41.3
41.6
43.0
Transportation
33.4
45.8
51.1
54.4
56.5
57.0
58.5
Communications
3.3
4.7
5.6
6.2
6.5
6.7
7.0
Trade
28.0
35.0
38.4
40.4
41.4
41.7
42.9
Services
78.5
92.7
100.0
106.1
108.2
110.5
113.1
Other (including 8.4
9.5
9.9
10.3
10.4
10.4
9.0
military personnel)
* See USSR: Measures of Economic Growth and Development, 1950-80, US
Congress, Joint Economic Connittee, Washington, 1982, for a description of
the methodology underlying this and the other GNP tables in this appendix.
** Components may not add exactly to total because of rounding.
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Table 2
USSR: GNP by End Use at Factor Cost*
(billion 1970 rubles)
1970
1975
1978
1980
1981
1982
1983
CHF**
383.3
459.8
.513.4
522.9
533.1
546.3
563.7
Consumption
207.8
247.3
266.2
282.1
288.1
290.2
297.3
Goods
133.1
158.6
169.9
180.2
183.8
183.6
187.5
Services
74.6
88.7
96.3
101.9
104.3
106.6
109.8
Investment
108.2
140.6
165.4
171.1
178.0
184.0
191.0
Mee**
67.3
71.9
81.8
69.7
67.0
72.1
75.4
* (See footnote on Table 1.)
* *
Components may not add exactly to total because of rounding.
*** Includes government administrative services, research and development,
and outlays not elsewhere classified.
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Table 3
USSR: Value Added in Industry at Factor Cost
(billion 1970
rubles)
1970
1975
1978
1980
1981
1982
1983
Industry*
122.6
163.2
182.4
191.2
195.7
200.2
207.0
Ferrous metals
8.8
10.7
11.3
11.2
11.1
11.2
11.6
Nonferrous metals
4.8
6.4
6.9
7.2
7.3
7.4
7.6
Fuel
12.1
15.4
17.2
18.0
18.2
18.6
18.8
Electric power
8.3
11.7
13.5
14.6
14.9
15.4
15.9
Machinebuilding
38.5
56.0
65.6
71.3
73.5
76.3
79.0
&metalworking
Chemdcals
7.8
11.7
13.4
14.0
14.5
14.8
15.7
Wood, pulp, and paper
9.4
10.7
10.7
10.4
10.6
10.6
11.0
Construction materials
8.0
10.4
11.5
11.0
11.1
11.1
11.5
Light industry
9.8
11.2
12.2
12.7
13.0
12.9
13.0
Food industry
11.6
14.3
14.9
15.3
15.6
16.1
16.9
Other industry
3.6
4.7
5.3
5.6
5.7
5.8
6.0
Components may not add exactly to total because of rounding.
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Table 4
United States and USSR: Production of Selected
Commodities in Selected Years
1970
1975
1978
1980
1981
1982
1983
Prhnary energya
(million b/d oe)
30.8
30.2
30.9
32.6
32.4
32.2
30.8
USSR
(million b/d)
17.1-
21.9
25.4
27.0
27.7
28.5
29.2
US
11.3
10.0
10.3
10.2
10.2
10.3
10.3
USSR
7.1
9.8
11.4
12.0
12.2
12.3
12.3
Natural gas (dry)
(trillion cubic feet)
US
21.9
20.1
20.0
20.2
20.0
18.5
16.7
USSR
7.0
10.2
13.1
15.4
16.4
17.7
18.9
Coal
(million metric tons)
US
557.6
593.9
608.0
752.7
747.3
760.3
712.0
USSR
577.5
645.0
664.0
653.0
638.0
647.0
645.0
Electricity (gross)
(billion kilowatt-hours)
US
1,743
2,131
2,436
2,438
2,448
2,387
2,459
USSR
741
1,039
1,202
1,294
1,326
1,367
1,416
Iron ore (million metric tons)
US
91.2
80.1
82.9
70.7
75.5
37.0
38.6
USSR
197.1
234.7
246.2
245.0
242.0
244.0
245.2
Pig iron (million metric tons)
US
83.0
72.5
79.6
62.3
67.3
39.1
44.2
USSR
85.9
103.0
110.7
107.0
108.0
107
110.2
Crude steel (million metric tons)
US
119.3
105.8
124:3
101.5
108.8
65.7
75.6
USSR
115.9
141.3
151.5
148.0
149.0
147.0
152.5
a Excluding minor fuels such as peat, shale, and fuelwood.
b Including natural gas liquids.
c Estimated.
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Table 4 (cont.)
1970
1975
1978
1980
1981
1982
1983
?
Primary altsnintin (thousand metric tons)
US 3,607
-43,519.
4,358
4,654
4,489
3,274
3,353
USSR
1,640
2,345
2,525
2,705
2,720
2,745
2,795
Synthetic ammonia (million metric
tons of NO
US
10.3
12.2
12.8
14.7
14.2
11.5
10.0
USSR
6.3
9.9
11.5
13.8
14.7
14.6
16.7
Mineral fertilizer (million
metric tons, nutrient content)
US
14.8
17.1
19.0
22.5
23.2
19.2
18.0
USSR
13.1
22.0
23.7
24.8
26.0
26.7
29.7
Nitrogen fertilizer (million
metric tons of NO
US
7.6
8.5
9.5
11.2
11.8
10.5
8.7
USSR
5.4
8.5
9.3
10.2
10.7
11.6
13.0
Plastics (million metric tons)
US
9.7
10.2
12.4
12.8
13.1
12.4
14.0
USSR
1.7
2.8
3.5
3.6
4.1
4.1
4.4
Synthetic rubber (million metric tons)
US
2.2
2.0
2.7
2.2
2.2
1.8
2.0
USSR
0.9
1.4
1.8
1.9
1.9
1.8
1.8
Woven cotton fabrics (billion square meters)
LS 6.7
4.4
4.4
3.9
3.3
3.3
3.5
USSR
6.2
6.6
7.0
7.1
7.2
7.1
7.3
Tractors (thousands)
US
191.7
232.0
197.3
155.4
149.8
80.8
91.6
USSR
458.5
550.4
576.1
555.0
559.0
555.0
564.0
Automobiles (millions)
US
6.5
6.7
9.2
6.4
6.2
5.0
6.7
USSR
0.3
1.2
1.3
1.3
1.3
1.3
1.3
Trucks and buses (millions)
US
1.7
2.3
3.7
1.7
1.9
2.4
3.7
USSR
0.6
0.8
0.8
0.9
0.9
0.9
0.9
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1970
1975
Table 4 (cont.)
1978 1980
1981
1982
1983
Cement (million metric tons)
US
67.4
61.8
76.2
68.2
65.0
57.5
63.9
USSR
95.2
122.1
127.0
125.0
127.2
123.7
128.2
Grain (million metric tons)
US
186.7
249.2
276.5
269.7
333.4
338.1
2084
USSRO
186.8
140.1
237.4
189.1
158e
1801
1951
Wheat (million metric tons)
US
36.8
57.9
48.3
64.5
76.0
76.5
66.0
USSR
99.7
66.2
120.8
98.2
81.0
86.0f
78.0f
Coarse grain (million metric tons)
US
146.1
185.5
222.1
198.4
249.0
254.6
138.g
USSRg
85.8
71.9
114.5
88.3
72.0
86.0
1051
Potatoes (million metric tons)
US
14.8
14.6
16.6
13.7
15.4
16.0
14.8
USSR
96.8
88.7
86.1
67.0
72.1
78.2
83.0
Sugar (million metric tons)
US
5.3
6.0
5.1
5.3
5.8
5.4
5.2
USSR
11.1
11.3
13.3
11.0
10.3
13.2
13.6
Meat (million metric tons)
US
22.5
23.0
25.0
24.2
24.7
24.1
25.0
USSR
12.3
15.0
15.5
15.1
15.2
15.4
16.4
Milk (million metric tons)
US
53.3
52.3
55.1
58.3
60.3
61.6
63.5
USSR
83.0
90.8
94.7
90.9
88.9
91.0
96.4
Ginned cotton (thousand metric tons)
US
2,219
1,808
2,364
2,422
3,405
2,605
1,682
USSR
2,343
2,674
2,669
2,958
2,882
2,673
2,609
d Measured in bunker weight. For comparison with the United States' or another
country's grain output, an average discunt of 11 percent should be used.
e Unofficially reported.
f USDA estimate.
g Excluding rice.
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Table 4 (cont.)
1970
1975
1978
1980
1981
1982
1983
Cement (million metric tons)
US 67.4
61.8
76.2
68.2
65.0
57.5
63.9
USSR 95.2
122.1
127.0
125.0
127.2
123.7
128.2
Grain (million metric tons)
US 186.7
249.2
276.5
269.7
333.4
338.1
208.?
USSRd 186.8
140.1
237.4
189.1
158e
1801
1951
Wheat (million metric tons)
US 36.8
57.9
48.3
64.5
76.0
76.5
66.0f
USSR 99.7
66.2
120.8
98.2
81.0
86.0f
780f
Coarse grain (million metric tons)
US 146.1
185.5
222.1
198.4
249.0
254.6
138.Q
USSRg 85.8
71.9
114.5
88.3
72.0
86.0
1051
Potatoes (million metric tons)
LE 14.8
14.6
16.6
13.7
15.4
16.0
14.8
USSR 96.8
88.7
86.1
67.0
72.1
78.2
83.0
Sugar (million metric tons)
US 5.3
6.0
5.1
5.3
5.8
5.4
5.2
USSR 11.1
11.3
13.3
11.0
10.3
13.2
13.6
Meat (million metric tons)
US 22.5
23.0
25.0
24.2
24.7
24.1
25.0
USSR 12.3
15.0
15.5
15.1
15.2
15.4
16.4
Milk (million metric tons)
US 53.3
52.3
55.1
58.3
60.3
61.6
63.5
USSR 83.0
90.8
94.7
90.9
88.9
91.0
96.4
Ginned cotton (thousand metric tons)
US 2,219
1,808
2,364
2,422
3,405
2,605
1,682
USSR 2,343
2,674
2,669
2,958
2,882
2,673
2,609
d Measured in bunker weight. For comparison with the United States' or another
country's grain output, an average discunt of 11 percent should be used.
e Unofficially reported.
f USDA estimate.
g Excluding rice.
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
Table 5
USSR: Selected Indicators of Agricultural Output
1970
1975
1978
1980
1981
1982
1983
Value of outputa
(billion rubles)
83.6
81.9
95.4
86.8
86.7
92.0
97.7
Commodity production (million metric tons)
Grainb
186.8
140.1
237.4
189.1
158.0c
180.0d
195.0d
Potatoes
96.8
88.7
86.1
67.0
72.1
78.2
83.1
Sugar beets
78.9
66.3
93.5
81.0
60.8
71.4
81.8
Sunflower seed
6.14
4.99
5.33
4.62
4.68
5.34
5.04
Cotton
6.89
7.86
8.50
9.96
9.64
9.28
9.22
Vegetables
21.2
23.4
27.9
27.3
27.1
30.0
29.1
Meat
12.3
15.0
15.5
15.1
15.2
15.4
16.4
Milk
83.0
90.8
94.7
90.9
88.9
91.0
96.4
Wool
.402
.448
.449
.443
.460
.452
.462
Eggs (billions)
40.7
57.4
64.5
67.9
70.9
72.4
75.1
a Net of feed, seed, and waste in constant 1970 prices.
b Bunker weight. To be comparable to Western measures, an average reduction of
11 percent is required.
c Unofficially reported.
d USDA estimate.
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Table 6
?
USSR: Freight Turnover by Transport Mode
(billions of ton/kilometers)
Year
Total
All Modes
Railroads
Roads
Inland
Waterways
Maritime
Pipelines
Wil 6:Clil Products)
Air
1970
3829.2
2494.7
220.8
174.0
656.1
281.7
1.88
1975
5200.9
3236.5
337.9
221.7
736.3
665.9
2.59
1976
5432.7
3295.4
355.1
222.7
762.2
794.6
2.71
1977
5632.7
3330.9
373.3
230.7
772.6
922.4
2.80
1978
5948.7
3429.4
396.0
243.7
827.6
1049.1
2.86
1979
5986.3
3349.3
409.6
232.7
851.1
1140.7
2.91
1980
6184.2
3439.9
432.1
244.9
848.2
1216.0
3.09
1981
6337.4
3503.2
458.9
255.6
853.5
1263.2
3.08
1982
6328.4
3464.5
464.0
262.4
834.5
1306.8
3.03
1983
6585.8
3600.1
464.5
273.2
891.7
1353.1
3.19
?
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
USSR:
Table 7
Estimated Hard Ckirrency Balance of Payments
(million current US dollars)
1970
1975
" 1978
1980
1981
1982
1983
Current account balance
260
-4,607
422
1,904
-175
4,333
4,663
Trade balance
-160
-4,797
275
1,714
200
4,433
4,713
Exports, f.o.b.
2,824
9,780
17,301
27,784
27,978
31,977
32,428
Imports, f.o.b.
2,984
14,-577
17,026
26,070
27,778
27,544
27,715
Net interest
-80
-570
-880
-700
-1,375
-1,200
-1,150
Other invisibles
and transfers
500
760
1,030
900
1,000
1,100
1,100
Capital account balance
NA
6,520
1,735
1,630
5,840
-1,340
1,650
Gross drawingsa
NA
6,371
3,095
2,865
6,200
2,450
4,300
Government backed
450
1,972
2,565
2,195
2,000
2,850
2,800
Commercial
NA
4,399
530
670
4,200
-400
1,500
Repayments
NA
969
2,330
3,050
3,200
3,315
3,800
Government backed
160
730
1,455
1,915
2,000
2,000
2,500
Commercial
NA
239
875
1,135
1,200
1,315
1,300
Net change in assets
held in Western banks
NA
-395
1,550
-235
-140
1,575
-400
Gold sales
Negl.
725
2,520
1,580
2,700
1,100
750
Net errors and amissionsb
NA
-1,913
-2,157
-3,534
-5,665
-2,993
-6,313
a
Including additions to short-term debt.
Reflects hard currency assistance to other Communist countries; hard currency
trade with other Communist countries; hard currency credits to LDCs to finance
Soviet sales of machinery and equipment (including military equipment); and
credits to developed Western countries to finance sales of oil and other
commodities, as well as errors in other line items of the accounts.
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
Table 8
tBSE4 Estimated Hard Ckirrency Debt to the Nest
(million US dollars, yearend)
1975
1978
1980
1981
1982
1983
Gross debt
10,577
16,375
17,865
20,865
20,000
20,500
Commercial debt
6,947
9,515
10,015
13,015
11,300
11,500
Government and
government-backed
debt
3,630
6,860
7,850
7,850
8,700
9,000
Assets in Western banks
3,125
5,975
8,565
8,425
10,000
9,600
Net debt
7,452
10,400
9,300
12,440
10,000
10,900
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
Table 9
USSR: Foreign Trade by Major Region
(million current rubles)
1970
1975
1978
1980
1981
1982
1983
Total Exports
11,520
24,034
35,668
49,635
57,108
63,165
67,891
Communist Countries
7,530
14;584
21,254
26,903
31,192
34,136
37,714
Developed West
2,154
6,140
8,699
15,862
17,247
18,849
19,653
Less Developed Countries
1,836
3,310
5,715
6,870
8,669
10,180
10,524
Total Irrpor ts
10,559
26,671
34,556
44,463
52,631
56,411
59,586
Cbmmunist Countries
6,873
13,968
20,744
23,650
26,742
30,816
33,692
Developed West
2,540
9,704
10,981
15,721
18,112
18,892
18,719
Less Developed Countries
1,146
2,999
2,831
5,092
7,777
6,703
7,175
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
Table 10
USSR: Average Annual Growth of Per-Capita Constniption
(1970 established prices)
Percent
1971-75
1976-80
1981
1982
1983a
Total consumption
2.9
2.1
1.9
-0.6
1.4
Food
1.6
0.8
0.7
-0.6
1.8
Soft goods
3.0
3.1
2.4
-1.5
0.7
Durables
10.0
5.4
6.4
-2.7
-0.3
Services
3.0
2.3
1.7
1.5
2.2
Housing
1.7
1.3
1.3
1.2
2.2
Utilities
5.3
3.8
2.7
3.0
3.0
Transportation
6.2
2.7
2.9
1.0
1.3
Communications
6.3
4.9
4.1
2.3
3.3
Repair and personal care
5.7
5.5
4.9
3.2
4.2
Recreation, art and
physical culture
0.7
0.2
-0.1
-0.9
-0.9
Health
1.5
0.8
0.2
0.9
1.3
Education
1.5
1.3
0
0.8
2.0
a Preliminary.
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
Table 11
United States and USSR: Production of Selected Consumer Goods
?
1970
1975
1978
1980
1981
1982
1983
Food
Graina
(kilpgraffs per capita)
US' 910
1,154
1,242
1,184
1,450
1,456
889
USSRe 769
551
908
712
598
667
716
Meatd
(kilograffe per capita)
US 110
106
112
106
107
104
107
USSR 51
59
59
57
57
57
59
Transportation
Passenger automobile productione
(units per hundred persons)
US 3.19
3.11
4.12
2.81
2.71
2.17
2.87
USSR 0.14
0.47
0.50
0.50
0.49
0.48
0.48
Household equipment
Washing machine productione
(units per thousand persons)
US 20
20
23
20
19
17
20
USSR 22
13
14
14
15
15
15
Washing ffachines in uses
(units per thousand persons)
USg 194
238
263
269
266
262
260
USSR 141
189
203
205
205
205
205
Refrigerator production
(units per thousand persons)
use 26
21
26
23
22
19
23
USSR 17
22
23
22
22
21
21
Refrigerators in useS
(units per thousand persons)
USg 336
340
349
352
352
349
NA
USSR 89
178
225
252
262
268
NA
a
The data do not necessarily represent food available for consumption, because hnports
of foreign grain and exports of domestically produced grain are not included.
Excluding corn silage and forage but including sorghum for grain.
Including miscellaneous grains and pulses. Mle-asured in bunker weight, i.e., gross
output from the combine which includes excess moisture, unripe and damaged kernels,
weed seeds, and other trash. For comparison with output in the United States or
other countries, an average discount of 11 percent should be applied.
Data for both countries are on a carcass weight, bone-in basis.
Data are for factory sales and include complete units exported for assembly.
As of the end of the year.
Data are understated because they are based on the number of households with one or
more units; thus, a household with more than one is counted as having only one.
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
Table 12
USSR:
Average Annual Employment by Sector
(thousands)
1970 1975 1978 1980
1981
1982
1983
Total
107,186
117,560
122,916
125,998
127,161
128,263
129,05
Industry
31,593
34,054
36,014
36,891
37,236
37,610
37,83
Construction
9,052
10,574
11,034
11,240
11,298
11,299
11,31.
Socialized agriculture
26,419
25,921
25,558
25,150
25,014
25,119
25,16
Transport and communications
9,315
10,743
11,462
11,958
12,172
12,337
12,43,
Trade, public dining, sales &material
technical supply, procurement 7,537
8,857
9,361
9,694
9,828
9,863
9,88'
Health, education, social security,
cultural arts, science & scientific
services
16,561
19,196
20,468
21,515
21,909
21,782
21,18:
Government administration, credit
& insurance organizations
2,226
2,707
2,952
3,144
3,218
3,267
3,30'
Other (housing, personnel services,
etc.)
4,483
5,508
6,067
6,406
6,486
6,986
7,92(
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
Table 13
USSR: Gross Fixed Capital Investmenta_
(billion rublei, 1973 prices)
1970
1975
1978
1980
1981
1982
1983
Totalb
of which:
80.7
112.9
129.7
133.7
138.8
143.8
152.0
State
69.2
98.0
113.9
117.7
122.7
127.0
133.8
Collective farms
7.6
10.7
11.6
11.9
11.9
12.4
13.2
Cooperative enterprises
and organizations
2.2
2.4
2.5
2.5
2.5
2.7
3.0
Private housing and
apartments
1.6
1.8
1.7
1.6
1.7
1.7
2.0
Industry
28.5
39.7
45.6
47.6
49.5
50.9
53.7
Agriculture
14.3
23.3
25.8
26.9
27.6
28.0
29.0
8.0
12.7
16.3
16.1
16.7
17.6
18.9
Transport and communications
Construction
3.0
4.3
5.2
5.4
5.4
5.9
5.9
Other
a Published Soviet data.
26.9
32.9
36.8
37.7
39.6
41.4
44.5
b Components nay not add exactly because of rounding.
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
Table 14
USSR: Growth of GNP and Factor Productivity
(average annual percentage change) _
1971-75a
1976-80a
1981
1982
1983
Gross national productb
3.7
2.6
1.9
2.5
3.2
Ca:tined inputsc
4.2
3.5
3.0
3.1
3.0
INanhours
1.7
1.1
0.8
0.9
0.8
Capital
8.0
6.9
6.4
6.3
6.3
Land
0.8
-0.1
-1.3
0.4
0.4
Total factor productivity
-0.5
-0.8
-1.0
-0.6
0.1
Alanhour productivity
2.0
1.4
1.1
1.6
2.3
Capital productivity
-4.0
-4.1
-4.2
-3.6
-3.0
a For computing average annual rates of growth, the base year is
the year prior to the stated period
Based on indexes of GNP (1970 rubles), by sector of origin, at
factor cost.
C Inputs of manhours, capital, and land are combined using
weights of 56 percent, 41 percent, 3 percent, respectively, in a
Cobb-Douglas (linear homogeneous) production function. These
weights represent the distribution of labor costs (wages, other
income, and social insurance deductions), capital costs
(depreciation and a calculated capital charge), and land rent in
1970, the base year for all indexes underlying the growth rate
calculations.
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
Table 1
USSR: Growth of Industrial Output and Factor Productivity
(average annual percentage change) -
1971-75a
1976-80a
1981
1982
1983
Industrial production
5.9
3.2
2.4
2.3
3.4
Cbmbined inputsb
5.2
4.6
4.3
3.9
3.9
holanhours
1.5
1.3
0.6
0.7
0.6
Capital
8.7
7.7
7.8
7.0
6.9
Total factor productivity
0.7
-1.3
-1.9
-1.6
-0.4
hlanhour productivity
4.4
1.9
1.8
1.7
2.8
Capital productivity
-2.6
-4.2
-5.0
-4.4
-3.3
a For computing the average annual rates of growth, the base
year is the year prior to the stated period.
b Inputs of manhours and capital are combined using weights of
48 percent and 52 percent, respectively, in a Cobb-Douglas
(linear homogeneous) production function. These weights
represent the distribution of labor costs (wages and social
insurance deductions) and capital costs (depreciation and a
capital charge) in 1970, the base year for all indexes underlying
the growth rate calculations.
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
Percent Growth
-
.
-
Figure 1
USSR: Average Annual Percentage
Growth of GNP and Non-Agricultural GNP
1
1971-75
1978-78
1
1979-82 1983-84
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GNP
NON-AG. GNP
Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
MIST .110OUC1S
0111311CALS
1011-1,01. US TALI
MOM MINIS
Figure 3
USSR: Average Annual Percentage Growth
of Output of Key Industrial Materials
1976-78
1979-82
V?.
1983-84
Wirdairegtairdr,
1979-82
1976-78
raroffeele/A
,IECOMV
1976-78
1979-82
1979-412
NII183-114
1983-84
1983-84
-2
0
;
Percent Growth
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
Figure 4
USSR: Average Annual Percentage Growth of Output of Fuels
reararatilieW
1979-82
1976-78 ?
\ 1983-64
1979-82
1983-64
A
VArde A
, \MOME MI
1976-78
1979-82
1983-84
ard fire/
1963-84
1979-82 ?
1976-78
1976-78
1979-82
1963-84
1.2
Percent Growth
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
Figure 5
UUSR: Average Annud Percentage Growth of Output of Consumer Nondurables
AIL 1111111191111A111111
PIOCISINIO IONS
1111111 MOMS
/01976-78
1979-82
1983-84
1970-78
1983-84
'XIZIMCM
1983-84
1979-82
676-78
0.5
2:5
Porcont Growth
3.5
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
Figure 6
USSR: Average Annual Percentage Growth of Transportation Activity
Gen PINNON?
ON PipsMin
V /7 /7 /7- 4777/77/7/77/ 41971-78
1979-82
CkN ?11183.."
z z.
1979-82
1983-84
'
ri ge%
1976-78
1979-82
1983-84
1976-78
1979-82
1983-84
1976-78
1979-82
1983-84
1976-78
10 1.52025
Percent Growth in Ton-Kilometers
??.
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1 .
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1 1
1
Fl9Lre 7
USSR: Key Estimated Direct end hd'rect
Deliveries to 14Story Procirement by Key Inckrstries in 198e
?
(as percent of told output)
Other Branches
Trans & Comm
Wood Products
Chemicals
A
Machinery
Electric Power
Fuels
Metallurgy
4
4
?
Si 20 is 30 ? ? 3$
Percent ??
Direct deliveries consist of raw and intermediate materials actually
used to manufacture procurement goods, such as steel for a tank.
Indirect deliveries account for all additional materials that are
needed to support military procurement. For example, indirect
deliveries would account for the electric power consumed to smelt
the steel embodied in the tank as well as the coal to generate
that electric power.
IP
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??????
?
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Approved For Release 2008/11/07: CIA-RDP90B01370R000300380004-4
Figure 8
USSR Average Amid Percentage Growth al Service Outlays
Strategic
Rocket
Air
Forces
Naval
Forces
Ground
Forces
Air
Defense
Total
077-03
INN1-70
600-71
0100-70
?
Orb43
1077-113 Asse-ht
ON-70
-6
-4 -2 0 2
Percent Growth
?
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O&M
Personnel
Construc-
tion
Procure-
ment
RTD&E
Total
Figure 9
USSR: Average Annual Percentage Growth of
Defense Spending by Resource Category
A
1?77-43
1145-70
W77-43
6115-75
1177-53
41.45-70
1477-113
V
1477-53
1477-43
W45-74
1185-74
1165-75
Pew* Growth
7
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Billion 1970 Rubles
Figure 10
USSR Defense Spending and Procurement, 1965-83
65
1?I ' I . I 1 I ' I ' I I
67 69 71 73 75 77 79 81 83
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