ESTIMATING SOVIET SPENDING FOR MILITARY HARDWARE FROM MACHINEBUILDING AND METALWORKING STATISTICS

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• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 69
• Document Creation Date: December 22, 2016
• Document Release Date: August 21, 2012
• Sequence Number: 1
• Publication Date: June 1, 1979
• Content Type: MISC

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Information Cutoff Date: 31 January 1979
Estimating Soviet Spending for Military Hardware
From Machinebuilding and Metalworking Statistics
June 1979
Off'ice of Strategic Research
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WORKING PAPER
Information Cutoff Date: 31 January 1979
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Estimating Soviet Spending for Military Hardware
From Machinebuilding and Metalworking Statistics
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Central Intelligence Agency
SECRET SR M 79-10078
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Estimating Soviet Spending for Military Hardware
From Machinebuilding and Metalworking Statistics
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Preface
The subject of this paper is the estimation of Soviet
spending for military hardware (missiles, aircraft, radar,
tanks, etc.) from statistics on the output of the
machinebuilding and metalworking (MBMW) industries.
The Soviet Union limits disclosure of its defense
spending to the publication of a single entry for "defense"
in the annual state budget. The scope of this entry is not
defined and it significantly understates total defense
expenditures. Western analysts, therefore, must estimate
Soviet defense spending to analyze trends in Soviet resource
allocation and to assess the impact of defense programs upon
the Soviet economy.
CIA estimates Soviet spending for defense primarily by
"direct costing", first identifying the activities that make
up the annual defense effort, then estimating the costs of
each. To check the results of the direct costing method,
however, analysts inside and outside CIA have attempted to
estimate selected categories of Soviet defense spending by
calculating unidentified residuals in the USSR's national
accounts. The residuals that can be calculated from MBMW
output statistics have been the ones most often used. But
before the MBMW residuals can be compared with direct
costing estimates, the limitations of the MBMW data must be
understood. This working paper describes the available data
and the results which their analysis yields. Then it
compares the MBMW residuals with direct costing estimates of
Soviet spending for military hardware.
A summary of the paper's conclusion is to be found on
pages v-x. A more detailed discussion of the method, the
data, and the results begin on page 1. A comparison of the
MBMW residuals with direct costing estimates is presented in
an annex which begins on page 47..
This working paper was prepared in the Military-Economic
Analysis Center of the Office of Strategic Research. Comments
and queries regarding this paper are welcome.
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Page
Preface . . . . . . . . . . . . . . . . .
. i
Summary . . . . . . . . . . . . . . . . . . . . . . .
v
Discussion . . . . . . . . . . . . . . .. . . . .
. 1
Evidence for the Inclusion of Military Hardware
in MBMW Statistics . . . . . . . . . . . . . . .
.1
Method and Data. . . . . . . . . . . . . . . . .
. 1
Alternative Sets of Data on MBMW GVO . . . . . . . .
. 2
Intermediate Use . . . . . . . . . . . . . . .
. 8
Final Uses . . . . . . . . . . . . . . . . . . . .
. 8
Exports and Imports . . . . . . . . . . . . .
. 9
Investment . . . . . . . . . . . . . . . . .
11
Public and Private Consumption. . . . . . .
16
Capital Ret5air . . . . . . . . . . . . . . . . .
19
The Residuals . . . . . . . . . . . . . . . . . . .
21
Appendices
Appendix A: Calculation of GVO. . . . . . . . . .
?27
Appendix B: MBMW Residual Calculations. . . . .
35
Source References . . . . . . . . . . . . . . . . .
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Annex 1: Comparison of MBMW Residuals With CIA
Estimates of Soviet Military Machinery
Purchases. . . . . . . . . . . . . . . . . .47
List of Tables
I. Flow Chart for Calculating the Value of
Soviet Militar Hardware as a Residual in
MBMW Output I. . . . . . . . . . . . . . . . . .vi
II. Best MBMW Residuals, 1966-75I . . . . . . .vii
III. Estimated Lower and Upper Limits of MBMW
Residuals, 1966-75
1. Estimated and Reported MBMW GVO, 1960-75I I. 3
2. Estimated Shares of Intermediate Use Output
in MBMW GVO, 1966-75
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3. Estimated Domestic Value of Soviet MBMW
Exports and Imports, 1966-75 . . . . . . . . 10
4. Estimated Value of Annual MBMW Output
Included in Re orted Capital Investment,
1966-75 . . . . . . . . . . . . . . . . . 13
5. Reported Values of Stocks of Uninstalled
Equipment and Estimated Values of Annual
Changes in these StocksF----] . . . . . . . . . . . 14
6. Calculated and Estimated Values of
Equipment for Investment in Existing State
Institutions, Schools, Hospitals,
Kindergartens, and Nurseries, 1960-75
7. Estimated Annual Values of MBMW Goods Used
for Public and Private Consumption, 1966-75
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8. Estimated Values of Capital Repair of
Machinery and Equipment, 1966-75
9. Best MBMW Residuals, 1966-75
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10. Lower and U er Limits of MBMW Residuals,
1966-75 . . . . . . . . . . . . . . . . . . . .24
iii
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A-I Estimated MBMW GVO, 1960-75
. . . . . . . 28
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A-II Estimated and Reported Industrial GVO,
1966-75F_____. . . . . . . . . . . . . . . . . . . . . . 31
A-III Estimated and Reported Industrial GVO,
1966-75. . . . . . . . . . . . . . . . . . . . . 32
A-IV Estimated Payments from MBMW Material
Incentive Fund, 1967-75 . . . . . . . . . . . 33
A-V Estimated MBMW GVO, 1966-75.. . . . . . . . . 34
B-I Best MBMW Residuals, 1966-75 (July 1, 1967
producers' prices, Establishment
Statistics) 0 . . . . . . . . . . . . . . . . . . 36
B-II Low MBMW Residuals, 1966-75 (July 1, 1967
producer's prices, Establishment
Statistics)S t a t i s t i c s ) ........ 37
B-III High MBMW Residuals, 1966-75 (July 1, 1967
producers' prices, Establishment
Statistics) . . . . . . . . . . . . . . . . . 38
B-IV MBMW Residuals for 1966 and 1972 (current
producers' prices, Commodity Statistics)F I.. 39
B-V Best MBMW Residuals, 1966-75 (current
producers' prices, Establishment
Statistics) . . . . . . . . . . . . . . . . . 40
B-VI Low MBMW Residuals, 1966-75 (current
producers' prices, Establishment
Statistics) . . . . . . . . . . . . . . 41
B-VII High MBMW Residuals, 1966-75 (current
producers' prices, Establishment
Statistics) . . . . . . . . . . . . . . . . . ..42
Annex I CIA Estimates of Soviet Military
Machinery Purchases and MBMW Residuals,
1966-75 I . . . . . . . . . . . . . . . . . . . 55
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Estimating Soviet Spending for Military Hardware
From Machinebuilding and Metalworking Statistics
Summary
Soviet military hardware producers belong to the MBMW
industries, and Soviet statistics on total MBMW output
apparently include the value of military hardware products.
Thus, the value of Soviet military hardware should be
obtainable as a residual of MBMW output after subtracting
the value of non-defense production (Table I). But the
unavailability of complete, compatible, and clearly defined
time series of the required MBMW statistics complicates the
estimating process and greatly reduces the reliability and
iicaf ill nose of i t-s rosnl t-s _ //
To illustrate the current state of the estimating art,
this paper calculates three time series of MBMW residuals
for 1966-75. Each includes annual best estimates and
estimated lower and upper limits within which the "true"
residuals might fall (Tables II & III). The first series
(Series A) is calculated from "official" Soviet statistics
on MBMW output in "establishment"* terms and in July 1, 1967
producers' prices. The second series (Series B)--which
includes residuals only for the years 1966 and 1972--is
calculated from Western estimates of MBMW output in
"commodity"** terms and in current producers' prices.
(These estimates are taken from Western reconstructions of
the Soviet input-output tables for 1966 and 1972). The
third series (Series C) is calculated from the author's own
estimates of MBMW output in "establishment" terms and in
current producers' prices. These estimates are based on
published Soviet reports of MBMW labor costs, their share of
MBMW production outlays, and MBMW profits.
The necessity of presenting these separate and often
quite different series illustrates a basic problem of the
available MBMW data and in current Western understanding of
them. The differences among the annual residuals in each
series reflect the differences among the alternative MBMW
GVO statistics from which they are calculated. All the
* Establishment MBMW statistics report the value of the
output of all MBMW establishments, including the value of
non-MBMW products.
** Commodity MBMW statistics report the value of all MBMW
output, including that of non-MBMW establishments.
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Table I
Flow Chart for Calculating the Value of Soviet
Military Hardware As a Residual in MBMW Output
A. MB M GVO (Gross Value of Output)
B. Less Intermediate Use Output
C. Equals MEI1 Produced for Final Use
D. Less Exports
E. Plus Imports
F. Less Investment (~ .~.
G. Less Public and Private Consumption
B. Less Capital Repair
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I. Equals Residual--An Estimate of the Value
of Military Hardware
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Table II
Best MB4'J Residuals, 1966-75 it ions of rubles, producers' prices)
Series A Residuals
3.1
3.9
5.8
8.1
9.2
10.3
12.3
15.0
16.3
20.3
7/1/67 prices
"establishmnt" statistics
As Share of GVO
5.7%
6.4%
8.4%
10.6%
10.8%
10.9%
11.7%
12.7%
12.4%
13.8%
Index (1966 - 100)
100
126
187
261
297
332
397
484
626
655
Series B Residuals
7.0
16.3
current prices
"camodity" statistics
As Share of GVO
11.5%
15.0%
Index (2966 - 100)
100
233
Series C Residuals
5.6
7.0
9.5
11.6
13.1
12.6
14.0
12.8
13.5
16.4
txj
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current prices
"
est.ablishrrnt" statistics
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As Share of GVO
9.5% ?
10.6%
12.8%
14.3%
14.69'
13.2%
13.4%
11.8%
11.3%
12.5%
Index (1966 - 100)
100
125
170
207
234
225
250
229
241
293
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alternative GVO statistics may represent valid measures of
MBMW output in Soviet terms. But while the alternative GVO
statistics are known to be expressed in different prices and
to reflect different ways of classifying output, published
information on Soviet prices and output classifications does
not explain the differences among them. Because of the
paucity of data on non-defense MBMW production,
substantially the same estimates of the value of non-defense
production (or in the case of intermediate use products the
same estimates of their share of GVO)* are incorporated in
the calculation of all three residual series. As a
consequence of this, the unexplained differences among the.
alternative sets of MBMW GVO statistics are passed on to the
MBMW residuals.
Another major weakness of the MBMW residuals is that
their composition is extremely uncertain. They almost
certainly include the value of missiles, combat aircraft,
naval ships, artillery, tanks, and all MBMW output of
uniquely military use.** They probably do not include the
value of MBMW purchased for consumption by military schools,
hospitals, the Ministry of Defense's central administrative
offices, or institutes engaged in military RDT&E (this
probably is accounted for as "public consumption" which is
subtracted in its entirety from MBMW GVO in the residual
calculations). But it is uncertain whether the residuals
include the value of all military hardware prototypes used
for RDT&E (this may not be included in MBMW GVO), common-use
durables such as trucks and construction equipment purchased
by the military, or capital repair of military equipment.
(At least some of these military uses of MBMW may be
.included in the estimates of MBMW investment goods, and
capital repair.) Also the residuals may include the value
of miscellaneous output not classified with any of the
categories of MBMW subtracted from GVO in the residual
calculations, and the "establishment" residuals may include
the value of some non-MBMW products.
* Published Soviet reports on the value of intermediate use
MBMW products (subassemblies, spare parts, and other
inventory items required in current production) pertain only
to its share of MBMW GVO.
** This may include military hardware exports, the value of
which would not be included in defense spending as defined
in US budgetary accounts.
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Table ITT
Estimated Lower and Limits of M13MW Residuals, 1966-75
(billions of rubles, producers prices
Series'A
771/67 prices
"establistment" statistics
1966 1967 1968 1969 1970 1971 1972 1973 1974 1975
-0.9- -0.2- 1.4- 2.5- 3.9- 4.2- 5.7- 7.4-
6.8 8.0 10.1 13.4 14.4 16.2 19.0 22.5
Series 0 3.0-
current prices 10.9
"oxrmodity" statistics
9.7-
22.8
7.1-' )n.2-
24.9 30.1
Series C 1.7- 2.8- 5.1- 6.0- 7.8- 6.6- 7.4-. ' 5.6- 4.9- 6.7-
current prices 9.4 11.1 13.9 16.8 18.2 18.3 20.4 20.0 21.7 25.6.
"establishment" statistics
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Yet another problem with the residuals is that the
average annual rates of growth which they imply are
implausibly high: about 23 percent in Series A of Table II,
.about 15 percent in Series B, and almost 13 percent in
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Series C. Even the "low growth" residuals in Series C grow
at an average of about 23 percent a year during 1967-70. Li
Much of the growth in all series probably reflects the
distortions introduced into the residual calculations by the
mixing of data that differ in price and scope. But in the
absence of homogeneous data on MBMW GVO and its non-defense
components, such mixing is almost inevitable, and the
"homogenizing" adjustments attempted may not accomplish
their task. The high growth rates in the 1966-68 period
also may be due in part to the military hardware price
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increases believed to have accompanied the 1967 reform of
Soviet prices. The overpricing of new products may also
account for some of the growth in all three residual series. 25X1
But the Soviet MBMW producers' price index, which is based
on a fixed sample of goods which may not include military
products, cannot be used to deflate the residual series.
A final problem with.the MBMW residuals is that often
there is a wide margin for error in the estimated values of
the categories of MBMW which are subtracted from MBMW GVO in
the estimating process. Errors in estimating these values
can have considerable impact on the MBMW residuals, and
Table III attempts to depict the impact which such errors
might have. Likely lower and upper limits were estimated for
the values of intermediate use MBMW, MBMW exports,
investment goods net of imports, public and private
consumption, and capital repair. These estimates then were
combined to calculate minimum and maximum estimates of the
MBMW residuals. It is most unlikely and, in instances where
negative residuals result, impossible that the true
residuals would lie at either of the extremes presented in
Table III. Still, Table III does give some sense of the
range within which the "true" residual could lie, and the
range is very.wide.
Because of this and the other problems described,
analysis of MBMW statistics is a very rough and uncertain
means of estimating the value of Soviet military hardware,
output. All the problems involved, moreover, are problems
of long standing and their solution is not in sight.
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Estimating Soviet Spending for Military Hardware
.From Machinebuilding and Metalworking Statistics
Evidence for the Inclusion of Soviet Military
Hardware in MBMW Statistics
Western analysts have bel.ieved for some time that
Soviet statistics on the aggregate value of MBMW output
include the value of military hardware products. The
inspiration of this belief is the Soviet economic
classification system, which assigns. military hardware
producers to the MBMW industries.(l)* The behavior of the
Soviet index of MBMW output for 1940-46 reinforces the
belief. (It rose by 29 points during 1940-45 and fell by
about one-third during 1945-46, apparently reflecting the
wartime growth and post-war reduction of military hardware
production) (2) So, too, do many published analyses of
MBMW data from the 1950s, 1960s, and 1970s.(3)
The evidence for the inclusion of military hardware in
MBMW data is not conclusive, but it is very persuasive.
Still, to say that the value of Soviet military hardware is
included in MBMW statistics and to say that its value can be
isolated are two different things entirely.
Method and Data
In concept, estimating the value of Soviet military
hardware from MBMW data is a simple process of assembling a
series of annual MBMW GVO statistics and subtracting all
non-defense production to calculate residuals. Presumably,
the residuals will include all MBMW produced for the
military plus any miscellaneous output not identifiable as a
non-defense use. In practice, however, the estimating
process is complicated by serious data problems.
Calculation of MBMW residuals requires complete and
homogeneous series of statistics on GVO, intermediate use,
exports, imports, investment goods, public and private
consumption, and capital repair. But there are major gaps
and anomalies in the available data and limitations in
Western understanding of them.
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*Serially numbered source references begin on page 43.
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Alternative Sets of Data on MBMW GVO
The Soviet economic yearbooks which are the major
sources of industrial statistics do not report MBMW GVO in
ruble terms.(4) Instead, they include an index of MBMW
output (Row A, Table 1). (This index was calculated from
data in the prices of July 1, 1955 for 1955 through 1967,
and in the prices of July 1, 1967 for 1967 through 1975) (5)
Occasionally, however, Soviet publications report MBMW GVO
statistics for a given year or years. Prior to 1972,
multiplying these statistics by the MBMW index was the only
means of generating a time series on MBMW GVO. But in 1972
Gosplan published a book on the Ninth Five-Year Plan which
reported MBMW GVO for 1970-75 in July 1, 1967 producers'
prices (Row B). Subsequently, the Soviet economic yearbooks
for 1972-75 reported MBMW GVO as a share of, total industrial
GVO in July 1, 1967 producers' prices. These reports pertain
to 1960, 1965 and 1970-75. Used in conjunction with other
published statistics, they yield an MBMW GVO series (Row C)
in which the values are very close to those which Gosplan
reported and consistent with the published Soviet index of
MBMW output.
A number of published Soviet sources also report MBMW
GVO statistics which are close to those reported by Gosplan
in 1972 or to those calculated from the information reported
in the economic yearbooks. One Soviet economist has reported
MBMW output values for 1960 (26.5 billion rubles) and 1973
(116 billion rubles) (6) that are approximately the same as
the reported and calculated values for those years in Rows B
and C. Another Soviet economist has cited figures identical
to the Gosplan reported data for 1970 and 1975, but may have
taken the information from the 1972 Gosplan work. (7) On the
other hand, for years in which GVO is reported in both
prices, the values in July 1, 1967 prices cannot be
converted into the earlier reported values in July 1, 1955
prices via published information on the relationship of the
prices in which they are expressed.(8) Also, yet another
Soviet economist has given higher MBMW output values for
1965, 1970, and 1975 (51 billion rubles, 88 billion rubles,
and 148 billion rubles). (9) In 1971 Premier Kosygin also
mentioned a GVO figure of 88 billion rubles for 1970. (10)
But there was no indication of the prices in which these
various figures were expressed.
As is often the case with Soviet data, the yearbook and
Gosplan-reported MBMW GVO statistics are not easily
reconciled with other published figures. Still, their
consistency with the MBMW index and their appearance in
authoritative sources mark them as the "official" figures.
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. Table 1
Estimated and i p r Mr 4 GVO, 1960-75
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n
oZ'nibles, pcaliZiiFs pr cc:s
1960
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
A.
Index
32
57
64
72
81
90
100
111
124
139
155
173
.
S.
7/1/67 prices
84.8
93.3
104.2
116.1
129.8
145.7
Index
100
110
123
137
153
172
C.
7/1/67 prices
27.0
48.6
85.1
95.1
105.9
117.9
132.4
147.1
LEL!C:.
32
67
100
112
124
139
156
173
D.
7/1/67 prices
54.3
61.1
68.7
76.3.
84.8
94.1
105.2
117.9
131.4
146.7
E.
Current prices
61.1
108.5
F.
Current prices
58.7
66.2
74.5
91.1
89.8
95.4
104.2
108.8
119.7
131.0
Scurcue:
A'12r)b,oye khozymtatvo SSSR v 1975 godu Statiaticheekiy yerhrgodnik (hereafter Nap. khon.) (Moscow, 1976), pp. 255-56;
k;n 1770 (,?!oocow, 1971), p. 204.
B. UL::;(, o.l.plan, r:oe wLirolucnn pyatiletniy plan rnsuitiya narodnopo khoaaatatua SSSR na 1971-1975 pody (Moscow, 1972), pp. 346-47.
C. Apperfix A, Table A-I, Row h'.
D. The t.:;.'{N CYO for 1970 in Row B (84.8) is multiplied by the index of MOW CVO in Row A.
E. V. Treml, D. Callik, and D. Koatinaky, "1966 Ex Post Input-Output Tables for the USSR: A Survey," in V. Tr-ml (ed.) Studies in Soviet
In;_.t_patput AnalJcia (New York, 1977), p. 49; Foreign Demographic Analysis Division (FDAD), US Dept. of Commerce, 'The Reconstructed
Soviet input-Output Table for 1972 in Producers' Prices", unpublished tables, 8 Dec. 1977.
F. Appendix A, Table A-V, Row I (rounded to one decimal point).
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Neither the 1972 Gosplan book nor the economic yearbooks of
the Central Statistical Administration have reported MBMW
GVO for 1966-69. But the values for these and other years
can be estimated by multiplying the 84.8 billion rubles
reported by Gosplan for 1970 by the index of annual MBMW
output (Row D).
The "official" MBMW GVO statistics for 1966 and 1972,
however, are lower than Western estimates of MBMW GVO in the
latest reconstructions of the 1966 and 1972 Soviet
input-output tables (Row E). In the recently published
reconstructed table for 1966, MBMW GVO in 1966 producers'
prices is 61.1 billion rubles, compared to the "official"
figure of 54.3 billion rubles in July 1, 1967 producers'
prices. In an as yet unpublished reconstruction of the
table for 1972 MBMW GVO in 1972 producers' prices is 108.5
billion rubles, compared to the "official" figure of 105.2
billion rubles in July 1, 1967 producers' prices (compare
Rows D and E of Table 1).
Part of the difference between the "official" figures
and the estimates in the reconstructed input-output tables
may be a matter of the prices in which they are expressed.
The "official" statistics, as noted above, are in July 1,
1967 producers' prices. The estimates from the reconstructed
input-output tables are in the current prices of 1966 and
1972. The Soviet producers' price index for MBMW, however,
fails to explain the quantitative differences between the
two sets of data. In fact, the index indicates that MBMW
prices were constant during 1966-67 and decreased 10 percent
by 1972.(11) If the reconstructed input-output table
estimates of MBMW GVO were converted to 1967 prices via this
index, the 1966 estimate would still be 61.1 billion rubles
but the 1972 e would increase to 120.6 billion
rubles .
Part of the difference between the "official"
statistics and the estimates in the reconstructed
input-output tables also may be a matter of different
measures of output. The "official" figures, like MBMW GVO
data reported before 1972, are probably "establishment"
statistics, which report the total output of all MBMW
)
c1
6
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prices.
establishments, including non-MBMW output.* The
reconstructed input-output table data are "commodity"
statistics which report total MBMW output, including that of
non-MBMW establishments. But the information which
published Soviet sources provide on the size of difference
between "commodity" and "establishment" MBMW GVO does not
satisfactorily explain the differences between the
reconstructed input-output table estimates and the
"official" Soviet figures. In 1959 the reported ratio of
"commodity" to "establishment" MBMW GVO was 0.92.(12)
Published Soviet data suggest that for the USSR as a whole
it ranged from 0.92 to about 0.95 during 1966-75 (13), and
in the Belorussian SSR the ratio was about 0.96 in both 1970
.and 1975. (14) (In a "private communication" to W.T. Lee, a
former Soviet economist reported that the ratio was 0.88 in
1966 (15), but this is contradicted by the data just
mentioned). But for both 1966 and 1972 the "commodity" to
"establishment" ratio implicit in a comparison of the
reconstructed input-output table estimates of MBMW GVO and
the "official" MBMW GVO statistics is much higher--l.125 for
1966 and 1.031 or 1.146 in 1972 depending on whether or not
the Soviet producers' price index is used to convert the
estimate from the reconstructed input-output table to 1967
Neither the Soviet producers' price index nor the
published information on the difference between "commodity"
and "establishment" output, therefore, sufficiently explains
the differences between Western estimates of MBMW GVO in the
reconstructed input-output tables for 1966 and 1972 and the
*In his 1977 work W.T. Lee makes an'interesting
"circumstantial" case for the hypothesis that the MBMW GVO
data reported by Gosplan and the post-1972 handbook MBMW
data are "commodity" statistics. Lee's argument..is based on
the virtual equivalence of the MBMW GVO for 1966 calculated
from the reports of Gosplan and the economic handbooks (54.3
billion rubles) and the estimate of MBMW GVO in an early
reconstruction) of the 1966 Soviet input-output table (54.9
billion rubles) (The Estimation of Soviet Defense
Expenditures, 1955-75. An Unconventional Approach (New
York, 1977), pp. 163-66). Now that the estimate of MBMW GVO
in the reconstructed input-output table for 1966 has been
revised to 61.1 billion rubles Lee's case is weakened
considerably. In the absence of evidence to the contrary
and in the light of past Soviet practice, the MBMW GVO
statistics reported since 1972 can be assumed to be
"establishment" data.
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Ell
"official" Soviet statistics
for
these years.
The
Western
estimates may not be final.
The
estimate for
1966
is a
recent revision of earlier pu
estimate for 1972 is, as yet,
blis
unp
hed estimates
ublished and
and
still
the
subject
to change.
25X1
Still, the estimates of MBMW GVO in the reconstructed
Soviet input-output tables are well-substantiated. Despite
their puzzling differences from the "official" Soviet .
statistics on-MBMW GVO, they may represent valid measures of
MBMW output. Nor are these estimates alone in differing
from the "official" figures in ways that have yet to be
explained. Estimates of MBMW GVO also can be derived from
labor costs, their share in production outlays and reported
profits. These estimates (Row F of Table 1), which represent
output in "establishment" terms, are in current prices.
According to the Soviet producers' price index, MBMW prices
were constant during 1966-68 and decreased thereafter. But
during 1966-75 the estimates based on labor cost are higher
than the "official" MBMW GVO figures for every year until
1972. (In both 1966 and 1972 they are approximately 4
percent lower than the estimates of MBMW GVO in Western
reconstructions of the Soviet input-output tables.)
The estimates based on labor costs must be regarded as
approximations, for as explained in the note to Tables A-II
through A-V,* their calculation requires some assumptions as
to the share of bonus, payments from profit in reported MBMW
wages. But even when the uncertainties involved are taken
into account, the estimates based on labor cost differ
significantly from the "official" statistics on MBMW GVO.
Marshalled alongside the estimates from the reconstructed
input-output tables, the estimates based on labor costs are
at least sufficient to suggest that the "official" figures
are not the only word on MBMW GVO. As a result, there is
great uncertainty as to the appropriate series of MBMW GVO
statistics with which to begin the calculation of a residual
representing the value of Soviet military hardware. The
determination of the appropriate set of GVO statistics,
moreover, cannot be divorced from the estimation of the
value of the largest claimant of MBMW output--intermediate
use .
--------------------
*See Appendix A, pp. 29-34.
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Table 2
Estimated Shares of Intermediate Use Output in M13 4 G'JO, 1966-75
1966 1967 1968 1969 1970 1971 1972
Best Estimate
A. All Internaediate Use .4151 .4223. .4283 .4353 .442 .4503 .4572
Low Estimate
B. All Intermediate Use .405 .412 .418 .425 .431 .439 .446
High Estinv to
C. All Intermediate Use .425 .432 .438 .445 .453 .461 .468
Sources:
1973
1974
1975
.4644
.4724
.4794
.453
.461
.468
.475
.483
.490
A. 1.
Calculated from data in'V. Treml, D. Gallik, and B. Xostinsky, "1966 Ex Post Input-Output Tables for the
USSR: A Survey," in V. Treml (ed.) Studies in Soviet Input-Output Analysis (New Yor(c, 1977), pp. 31-49.
2.
Calculated from data in FDAD, U.S. Dept. of Commerce, The Reconstructs Soviet Input-Output Table for
tai
1972 in Producers' Prices," unpublished tables, 8 Dec. 1977.
CJ
3.
Interpolated
ttnJ
H
4.
Lrtrapolated
B. Allows for an error of -.01 in theestimate for 1966 and'for the same degree of error in the estimates for
other years.
C. Allows for an error of +.01 in the estimate for 1966 and for the same degree of error in the estimates for
other years.
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Intermediate Use
Intermediate use MBMW output consists of subassemblies,
spare parts and other inventory items required for current
production. Determining its value is of critical importance
to the calculation of a military residual, for intermediate
use is the largest claimant of MBMW output. But there are
few reports of its value in Soviet sources, and the
available reports refer to the share of intermediate use in
MBMW GVO. If these reported shares are multiplied by the
different series of MBMW GVO statistics presented in Table
1, the resulting estimates of the value of intermediate use
display the same relative differences as the GVO series.
Further problems arise because some of the Soviet
reports on the share of intermediate use or its components
in MBMW GVO appear to be mutually contradictory (16) and
pertain to only a few particular years. Extrapolation or
interpolation of the shares for other years, therefore, is
an error prone process. Because of the large size of
intermediate use, a small percentage error in estimating its
annual share of GVO may result in an error that is large
relative to the military hardware residual. Also, and more
importantly, the reported shares apparently are calculated
from input-output table data, especially the All-Union
input-output tables for 1966 and 1972. As a result, they
are not necessarily applicable to MBMW GVO statistics that
differ in price and scope.
The estimates in Table 2 are presented subject to the
qualifications just discussed. In Row A the shares of
intermediate use in MBMW GVO during 1966-75 are estimated by
interpolation or extrapolation from the estimated shares in
the reconstructed input-output tables for 1966 and 1972. To
reflect at least some of the uncertainty involved, Rows B
and C allow for an absolute error of .01 on either side of
the estimate for 1966 and for the same degree of error in
the estimates for other years..
Final Uses of MBMW
Because intermediate use is reported only as a share of
MBMW GVO, the estimates of its value display the same
unexplained relative differences as the alternative sets of
MBMW GVO statistics. So too do the estimates of final use
MBMW--the difference between GVO and intermediate use.
Another problem with the estimates of final use MBMW is
their treatment of the value of military hardware prototypes
used for RDT&E. Military prototypes may account for a
significant part. of Soviet spending for defense. Yet, it is
r
E
0
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2
C T: "'D
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uncertain whether the value of all military prototypes is
included in the statistics on MBMW GVO. (17) As a result, it
is also uncertain whether they are included in the estimates
of final use output.
. There are similar problems as to the scope of the data
on the non-defense claimants of final use output. These are
compounded by the unavailability of complete and homogeneous
time series of statistics on the various claimants.
Exports and Imports
Soviet economic yearbooks regularly report the value of
MBMW exports and imports, but they do so in foreign trade
prices (Rows A-1 and B-1 of Table 3). Such prices may
differ substantially from domestic Soviet prices. Yet,
while overall foreign to. domestic price conversion
coeffiecients for all imports and exports can be calculated
from data occasionally reported in Soviet publications,
conversion coefficients for MBMW products.
published Soviet sources say very little about the
higher than those for imports or vice versa.
In their work on foreign trade pricing in the 1966
Soviet input-output table, Kostinsky and Treml calculated a
ratio of domestic to foreign trade MBMW prices of 0.71 from
data reported by I.D Belkin.(18) Belkin's data pertained to
imports, but Kostinsky and Treml recommended using a
conversion ratio of 0.71 for imports and exports both. Lee,
however, makes a plausible argument that the coefficients
should be higher, and that the coefficients for imports and
exports should differ as well.(19) Both of his points are
well taken. But the limitations in our understanding of the
subject are such that it is difficult to determine whether
the conversion coefficients for MBMW exports should be
Soviet sources. (20)
The estimates in Table 3 reflect the range of
possibilities suggested by the findings of Kostinsky and
Treml, and. the objections raised by Lee. Conversion
coefficients of 0.71 are used to convert both imports and
exports from foreign trade to domestic prices (Rows A-2 and
B-2). Higher coefficients are used as well. Those for
imports (Rows B-3 and B-4), however, are higher than those
for exports (Rows A-3 and A-4) on the grounds that this is.
true of the overall conversion coefficients for all imports
and exports calculated from data reported in published
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ladle l
Estimated Domestic Value of Soviet MPrsa Exports and b ports, 1966-75
i
ons of nibles)
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
A.
Exports
1.
Foreign Trade Prices
1.654
1.832
2.072
2.361
2.480
2.705
3.006
3.448
4.000
4.493
2.
.(Al x 0.71)
1.174
1.301
1.471
1.676
1.761
1.921
2.134
2.448
2.840
3.190
3.
(Al )c 0.85)
1.406
1.557
1.761
2.007
2.108
2.299
2.555
2.931
3.400
3.819
4.
(Al x 1.00)
1.654
1.832
2.072
2.361
2.480
2.705
3.006
3.448
4.000
4.493
B.
Imports
1.
Foreign Trade Prices
2.308
2.625
3.127
3.486
3.753
3.817
4.609
5.337
6.100
9.040
2.
(B1 x 0.71)
1.639
1.864
2.220
2.475
2.665
2.710
3.272
3.789
4.331
6.418
3
(B1 x 1.00)
2.308
2.625
3.127
3.486
3.753
3.817
4.609
5.337
6.100
9.040
tII
.
En
tII
C)
4.
(B1 x 1.25)
2.885
3.281
3.909
4.358
4.691
4.771
5.761
6.671
7.625
11.300 C)
I
tI
I
F-j
tII
H
Q
H
Source:
Al and B1 - Nap. khos1968, pp. 857-58; Nap. khos. 1969, pp. 652-53; Nar. khoz:.197pp. 739-40; Nar. khoz. 1973,
pp. 790-92; Nar. k ho' j a. 1975, pp. 753-56.
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0
c
The estimates are open to criticism for making no
allowance for change over. time, and for not capturing the
full range of possible conversion coefficients. Both are
valid criticisms, but the questions they involve cannot be
answered satisfactorily given the available evidence.
Consequently,-the conversion of MBMW exports and imports
from foreign trade to domestic prices involves much
uncertainty. The uncertainty is an obstacle to the
calculation of a good residual estimate of the value of
Soviet military hardware throughout 1966-75, but is an even
greater barrier in the later years. During the 1970s Soviet
foreign trade in MBMW grew very rapidly, with imports
growing much more rapidly than MBMW GVO. In 1975, depending
on the conversion coefficients used in Table 3, the value of
net imports of MBMW could range between 1.9 and 8.1 billion
rubles. (Net imports are 4.5 billion rubles in foreign
trade prices).
c
c
0
e
0
c
A final complicating factor is that, while the Soviets
export and import military hardware, they apparently do not
include the value of all such hardware in their reported
data on MBMW foreign trade. Moreover, they may not include
any military hardware except for some communications
equipment in the MBMW foreign trade statistics. (There are
residuals in Soviet MBMW import and export statistics when
non-defense related products are subtracted from them. At
least for some years, however, the residuals have been
concluded to consist of communications equipment.) (21) In
any event there is uncertainty involved. The uncertainty as
to what the MBMW foreign trade statistics include results in
uncertainty.as to what is subtracted from MBMW GVO and what
remains in the MBMW residuals.
state institutions, hospitals, schools, and pre-schools.
Soviet sources regularly report the value of most of
the MBMW output used for investment. But these data--the
equipment, tool, and inventory component of capital
investment--may not be reported in the year in which the
MBMW investment goods are produced. Also they are expressed
in prices that include transportation and handling charges,
neither of which are included in the producers' prices in
which other MBMW output is expressed. Finally, they exclude
the value of changes in the stocks of uninstalled equipment
and equipment for existing (as opposed to newly constructed)
C
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There is wide, but not universal agreement among
Western analysts that the statistics on the annual value of
MBMW investment goods are not reported on a production year
basis. The estimates in Table 4 reflect the different
positions which analysts have adopted on this question. The
best estimate corrects the equipment,
tool, and inventory
data for an assumed six month
lag between production and
reporting as investment (22)
(Row B).
The low estimate
assumes there is no lag
at
all
(Row
A)
(23),
and
the
high
estimate assumes there
is a
lag
of
one
full
year
(Row
C).
(24)
There is also disagreement about the share of
transportation charges and of non-MBMW products such as
furniture in the reported values of equipment, tool, and
inventory. Both, however, must be removed to make the data
compatible with producers' price data on MBMW output. The
best estimate (Row E) is that transportation charges and
non-MBMW products account for 12 percent of the value of
equipment, tool, and inventory.(25) The low estimate is
that they account for 9 percent, and the high estimate is 15
percent.
These estimates are in July
1,
1967 pro
ducers'
prices.
(The unadjusted data from which
they
are est
imated
are
expressed in 1969 estimate prices, which rep
ortedly
reflect
the July 1, 1967 prices of machinery and equipment). (26) If
they are to be subtracted from MBMW GVO in current
producers' prices, a price adjustment is necessary. The
re-calculation of the equipment, tool, and inventory
component of investment in January 1, 1973 prices published
in the most recent Soviet economic yearbook provides at
least a rough basis for such an adjustment.
In 1973 the reported value of equipment, tool, and
inventory investment in January 1, 1973 prices (29.9 billion
rubles) was approximately 96 percent of its value in July 1,
1967 prices (31.1 billion rubles). This implies an average
annual decrease in prices of about 0.6 percent during
1968-73. Row G presents the price index which reflects this
average annual rate of decrease (1966 prices are assumed to
equal 1967 prices and the 1968-73 rate of decrease is
extrapolated through 1975. Rows H-J report the results of
multiplying the July 1, 1967 price estimates in Rows D-F by
this index of current prices.
Next it is necessary to account for the values of
annual changes in the stocks of uninstalled equipment and of
equipment produced for existing state institutions, schools,
hospitals, and pre-schools. The former never were included
El
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1-W .
Estimated Value of Annual MIDM'I Output Included In Peported Capital Investment, 1966-1975
(Billions of Rubles)
It. Equipment, Tool, and
inventory (7/1/67
purc)iasers' prices)
B. Row A corrected for a
six-month lag
C. Row A corrected for a
one year lag
D. Pow A x 0.85 (estimated
7/1/67 producers' prices)
E. ks. D x 0.88 (estimated
7/1/67 producers' prices)
F. W-C x 0.91 (estimated
7/1/67 producers' prices)
G.' Estimated Index of current
prices
H. Ptiw D x Prrw G (estimated
current producers' prices)
1. Per t; x R,-fw G (estimated
current pr(x1ucers' prices)
J. Pow P x P.7w G (estimated
cu rent producers' prices)
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
10.51
19.91
21.51
22.51
25.31
26.61
28.81
31.11
34.11
30.51
42.22
19.2
20.7
22.0
23.9
26.0
27.7
30.0
32.6
36.3
40.4
19.9
21.5
22.5
25.3
26.6
28.8
31.1
34.1
38.5
42.2
15.7
16.9
18.3
19.1
21.5
22.6
24.5
26.4
29.0
32.7
16.9
18.2
19.4
21.0
22.9
24.4
26.4
28.7
31.9
35.6
18.1
19.6
20.5
.23.0
24.2
26.2,
28.3
31.0
35.0
38.4
1.00
1.00
.994
.988
.982
.970
.970
.964
.958
.953
15.7
16.9
18.2
18.9
21.1
22.1
23.8
25.4
27.8
31.2
16.9
18.2
19.3
20.7
22.5
23.8
25.6
27.7
30.6
33.9
18.1
19.6
20.4
22.7
23.8
25.6
27.5
29.9
33.5
36.6
A. I. 171x. k;i~1a.? 1375, p. 503.
2. za rclct, p. 433. This source reports the value of equipment toot and inventory in 1/1/73 prices (40.7 billion rubles). In
rc i thin jiJure is converted to 7/1/67 prices by multiplying the reported value by an implicit ratio of 7/1/C? prices to 1/1/73 prices.
The ratio was calculated by dividinrr the value of equipment, tool, and inventory for 1975 reported in Nor. khoa.1975 (38.5 pillion rubles)
ty the value reported for 1975 in Nar.khoz. za 60 let. (37.1 billion rubles).
B. Each year's value iii Rom A is added to the. fol o year's and the sum is divided by 2.
C. Each year's value in Roo A is auoumed to represent the previous year's production.
D. An eati'ute of the 7/1/67 producers' price value of equipment, tool, and inventory net of non-MRMW products.
E. An cetrxrte of the 7/1/67 producers' price value of equipment, tool, and inventory net of non-MDMW products.
F. An ;ati-kzte of the 7/1/67 producers' price value of equipment, tool, and inventory net of non-MDMW products.
G. This refleoto a rate of deflation of 0.6% per year,f}'oip 1967 to 1975 with 1966 prices assumed to equal 1967 prises., The deflation rate
is implicit in a comparison of the value of equipment, tool, and inventory for 1973 in 7/1/67 prices (31.1 billion rubles per I,khoa.
li.a) with the some year's value in 1/1/73 prices (29.9 billion rubles per Nar.khos. ma. 60 let.
H. Calculations as indicated.
1. Calcul.rtiono as indicated.
J. Calculations as indicated.
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Table 5
ted Values of Stocks of Uninstalled Equipment and Estimated Values of Annual Changes in These Stocks
(billions o
es, stock values as of Jan. 1 of given year)
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
3.31
3.51
5.02
4.93
5.23
6.34
B.
Estimated Annual Change
0.2.
0.75
0.75
-0.05
-0.05
0.1
0.11
0.1
0.55
0.55
Sources:
Al. A. Vozyakov, "Povyahat' effektivnost' kapital'nogo etroyitel'stva," Finanny SSSR, No. 8 (Aug. I967), p. 7.
2. S. Butler, "The Soviet Capital Investment Program" in Joint Economic Committee, U.S. Congress, Economic
Pcrfot+nance and the Military Durden.in the Soviet Union (Washington, D.C. 1970), p. 46.
3. N.S. Zoe ton, "Vyche uroven' raboty uchrenh eniy stroybanka," Financy No. 6 (June 1974), p. 46.
4. V.A. Spcktor,'Iovy::heniye effektivnoati snabzheniya otroyite 'etva," lkonomika otroitel'stva No. 1 (1977),
p. 71. This source reports the value of stocks "in 1975". It is assumed that he is referring to
Dec. 31, 1975-Jan. 1, 1976.
B. Each stock value in A is subtracted from that which follows and the result is divided by the number
of years between the dates to which the reports apply.
C~ C C~ C~ d C 7D U ? C? ] ~~
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Table 6
Calculated and Estimated Values of Dquipncnt for Investment in ncistin State Institutions,
Sc X0013, ttospita 3, Y,xnJcr.~~?rt^nz..'in Nur:czics
'lions of nihl~s,_1955 estvnate prices
A
State and Cooperative.
Investor it as Reported
k
b
B.
State and Cooperative
Investment as RcpDrted
in the 1965 itanebook
C.
Difference Between
A and B
oo
in the 1964 Hand
8
30
30.0
0.8
.
32
7
.31.9
0.8
.
34
8
34.0
0.8
.
37
0
36.1
0.9
.
40.4
39.4
1.0
1965 --
Year
1960
1951
1V62
1963
1964
1^GG
1967
1^53
1969
1970
1971
1972
1973
1974
1975
4. P. 511.
2. ;i 7r K:ros 1505, p. 528.
C. C i.c:.:.a:ed from A and B.
D. trapoZated from C.
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D
Estimated
Values
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in reported equipment, tool and inventory data. The latter
were included prior to 1965 but have not been included
since.
Table 5 lists, the stock values of uninstalled equipment
that Soviet sources have reported for the period 1966-1975
(Row A) and then calculates the values of the annual changes
in these stocks (Row B). In some cases there is no problem
with the calculations, but when stock values for successive
years are not available, the annual changes are interpolated
from the values for non-successive years. This is a likely
source of error. Also these data are in current prices and
differ from constant price investment data. But because of
the small size of the figures involved, price adjustments
would be negated when the estimates are rounded to a single
decimal place. Table 5, therefore, makes no adjustment for
the difference between current and constant prices.
The Soviet economic yearbooks for all years up to 1964
included the value of equipment for existing state
institutions, hospitals, schools, and pre-schools in the
reported investment data. The yearbooks for 1965 and
subsequent years have not included the value of such
equipment. For 1960-64 the values can be calculated by
subtracting the 1965 yearbook's investment data for those
years from the same years' investment data in the 1964
yearbook (Column C of Table 6). But for other years the
statistics required for such calculations are not available
and the values must be extrapolated (Column D). Moreover,
the calculated and estimated values are in 1955 estimate
prices, and so are not compatible with data expressed in
different prices. Again, however, the small size of the
statistics involved and the fact that they should be rounded
to a single decimal place militate against price
adjustments.
A final point to be noted is that MBMW investment data
may include the value of common-use durables such as trucks
and construction equipment purchased by the military.(27)
(Common use durables, moreover, could include such things as
transport aircraft and auxiliary ships.) But the inclusion
of such goods in the investment data is uncertain. So too,
therefore, is their inclusion in the military hardware
residuals.
Public and Private Consumption
The value of MBMW output produced for public and
private consumption in 1959-63 is reported--in purchasers'
prices--in the 1964 Soviet economic yearbook.(28) For other
51
25X1
U
U
25X1
2
0
0
25X1
U
r"
25X1
U
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Table 7
Estimated Annual Values of f13 Cyoods Used for Public and Private Consuption, 1966-75
A.
Current Producers' Prices
4.81
7.92
B.
Index of Consumer Durables
(constant prices)
100
109
122 133
149
169
194
210
227
248
C.
Best Estimate (1967
producers' prices)
4.8
5.2
5.9 6.4
7.2
8.1
9.3
10.1
10.9
11.9
D.
Best Estimate (current
Producers' prices)
4.8
5.1
5.6 5.9
6.5
7.1
7.9
8.4
8.8
9.4
E.
Low & High Rage (1967
4.3-.
4.7-
5.3- ...5.8-
6.5-
7.3-.
8.4-
9.1-
9.8-
10.7-
producers' prices)
50
5.7
6.5 7.0
7:9
8.9
10.2
11.1
12.0
13.1
F.
Low & High Range (current
4.3-
4.6-
5.0- 5.3-
5.9-
6.4-
7.1-
7.6-
7.9-
8.4-
producers' prices)
5.3
5.6
6.2 6.5
7.1
7.8
8.7
9.2
9.7
10.4
U)
to
tr1
t7
Sources: C)
C)
A.I.
Trem1, Gallik, and Kostinsky, "1966 Ex Post Input-Output Tables for the USSR," pp. 47-49.
2.
M
FDAD
"The Reconstructed Soviet Input-Output Table for 1972 in Producers' Prices
" unpublished tables
H ~
,
,
,
8 Dec. 1977. H
B. Gertrude E. Schroeder and Barbara S. Severin, "Soviet Consumption and Income Policies in Perspective,"
in Joint Economic Committee, U.S. Congress Soviet Economy in a New Perspective (Washington, D.C.,
Oct. 1976), p. 646.
C. The 1966 value in A is assumed to be in 1967 prices and the values for other years are estimated by
multiplying this value by the index reported in B.
D. The 1966-7S values in C are deflated by assuming that the average annual rate of inflation of comparable
prices relative to current prices was that implicit in a comparison of the 1972 values in A and C (with
1966 = 100).
E. Plus or minus 10 percent of the estimates in C.
F. Plus or minus 10 percent of the estimates in D.
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SECRET
years, however, Soviet yearbooks do not report such
information and the value of MBMW consumer goods must be
estimated. Good estimates can be made for some years, but
it is difficult to compile a complete and homogeneous time
Row A of Table 7 presents the estimates of the value of
MBMW consumer goods from the reconstructed Soviet
input-output tables for 1966 and 1972 in current producers'
prices. Row B presents an index of Soviet consumer durables
output in constant prices published by two Western analysts.
Rows C and D combine the estimates for 1966 and 1972 and the
index of consumer durables output to generate two time
series of consumer durables output: one in July 1, 1967
prices (Row C) and one in current prices (Row D). The
calculation of these two series, however, entails some
heroic assumptions: 1) that the 1966 price estimate in Row
A is equal to the value of public and private consumption in
July 1, 1967 prices. 2) that the scope of the estimate for
1966 is the same as that of the consumer durables index in
Row B, and 3) that the difference between the estimates for
1972 in Rows A and C (7.9 and 9.3 billion rubles) reflects
the difference between current and constant prices.
Admittedly each of these assumptions is questionable.
The prices of MBMW consumer goods could well have changed
during 1966-67. The scope of the estimate for 1966 and that
of the index.may be quite different. Even if the difference
between the two estimates for 1972 (7.9 billion rubles and
9.3 billion rubles) were solely the result of price changes
the rate of change is unlikely to have been constant over
time. To reflect the error involved, therefore, Table 7
allows for a range of plus or minus 10 percent in both the
constant and current price estimates (Rows E and F).
There is, however, yet another problem with these
estimates. It is possible that the estimates of public
consumption include some military purchases, specifically
those for the current use of military schools, hospitals,
the administration of the MOD, and institutes engaged in
military RDT&E. That all or part of such purchases are
included in public consumption is uncertain. But it is
generally accepted among Western analysts that Soviet
budgetary outlays for health, education, administration, and
science include outlays for military activities in these
fields.(29) There are equal grounds for believing that
reported consumption by education, health, administration
and science--all "public" consumers of MBMW--include
consumption by military education, health, administration,
and science institutions. At least in a relative sense,
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n
25X1
li
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2
E
2
fl
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there is more reason to believe that military purchases are
included in public consumption than in investment, foreign
trade or the other claimants of MBMW output.
G
n
C
C
C
C
C
Capital Repair
Capital repair of machinery and equipment is the last
of the uses of MBMW to be subtracted from MBMW GVO in the
calculation of military hardware residuals. Soviet
yearbooks include an index of repair calculated-from data in
constant prices. But this reports the output of specialized
repair establishments rather than of all repair of machinery
and equipment. Moreover, the index may include categories
of repair which already have been accounted for in.the
estimates of.the uses of MBMW output presented on previous
pages. (Current repair of machinery and equipment is
classified as intermediate use, and the value of MBMW used
for public consumption includes the value of some repair.)
As a result this index is.of little use for our
calculations.
Good estimates of the value of capital repair are
presented in the Western reconstructions of the Soviet
input-output tables for 1966 and 1972 (Row A of Table 8).
But these estimates may not be comparable. This is suggested
by the fact that capital repair amounts to about 82 percent
of repair GVO in the 1966 table (30), but only to about 64
percent in the 1972 table.(31) It is extremely unlikely
that this sharp decline in capital repair's share of repair
GVO reflects an actual difference between the 1966-72 growth
of capital repair and the growth of repair as a. whole. A
more likely explanation is that some types of output
classified as capital repair in 1966 were classified
differently in 1972.
percent on either side of the estimates in Row B.
Given the apparent difference in scope between the
estimates of the value of capital repair for 1966 and 1972,
using them to estimate the values for other years is likely
to lead to error. But there is little else that can be
done. In Row B the 1966 and 1972 estimates of the value of
capital repair are taken from the reconstructed Soviet
input-output tables for those years, the estimated values
for 1967-71 are interpolated, and the estimated values for
1973-75 are extrapolated. In recognition of the
uncertainties involved, Rows C and D allow for a range of 10
These estimates are in current prices and are
"commodity" statistics. As such they should not be combined
with constant price "establishment" data in residual
-19-
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Table 8
Estimated Values o Caj 1 Real 1966-75
(billions of rubles, producers prices
1966
1967
1968
1969
1970
1971
1972.
1973
1974
1975
A.
Curent Prices
6.71
9.72
B.
Best Estimate
6.7
7.1
7.6
8.0
8.6
9.1
9.7
10.3
11.0
11.7
C.
Icw Estimate
6.0
6.4
6.8
7.2
7.7
8.2
8.7
9.3
9.9
10.5
D.
High Estimate
7.4
7.8
8.4
8.8
9.5
10.0
10.7
11.3
12.1
12.9
A.1.
2.
As in Table 7, note A-1
As in Table 7, note A-2
Co
C
t=]
B.
C.
Interpolated (1967-71) and extrapolated (1973-75)
B x .9
H
D.
Bx 1.1
C~31 C= = = 1 r C:D c c c
ED
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C--D F-71
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0
C
C
calculations without adjusting for the differences in price
or scope. But in'the absence of a price index or
"commodity/establishment" ratio for capital repair, any
adjustments would be arbitrary and so no adjustment is
A final problem is that the estimated values of capital
repair may include military purchases. (32) But the share of
attempted.
such purchases in the estimates is unknown.
The Residuals
The data problems described above do not allow for the
calculation of a single time series of credible point
estimates of the value of Soviet military hardware for
1966-75 from MBMW statistics. Rather they require the
calculation of a number of separate series in which the
annual estimates entail a wide range of uncertainty.
Table 9 presents "best estimate" MBMW residuals
calculated from the three alternative sets of MBMW GVO
statistics discussed in this report: the "official" Soviet
statistics (in July 1, 1967 prices and "establishment"
terms), the estimates of MBMW output from the reconstructed
Soviet input-output tables for 1966 and 1972 (in current
prices and "commodity" terms), and the estimates based on
labor costs, their share in production outlays, and reported
profits (in current prices and "establishment" terms).
The necessity of presenting these separate and often
quite different series of MBMW residuals illustrates a basic
problem with estimating the value of Soviet military
hardware output from MBMW statistics. The alternative MBMW
GVO statistics from which the residuals are calculated may
all represent valid measures of MBMW output. But while the
alternative GVO statistics are known to be expressed in
different prices and to reflect different ways of
classifying output, published information or Soviet prices
and output classifications does not explain the differences
among them. Because of the paucity of data on non-defense
MBMW production, the same estimates of MBMW exports,
imports, capital repair, and the same estimates of the share
of intermediate use in MBMW GVO are incorporated in the
calculation of all three residual series. The estimates of
the value of investment goods and consumer durables.are
based on the same raw data. Because of adjustments for the
difference between current and constant prices, different
estimates of their value are incorporated in the calculation
of the Series A residuals on the one hand and the Series B
and C residuals on the other. But these differences are
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Table 9
Best MI3 Z iiesi~cIOLATs,
1966-75
(bill onSOT rubles, p ucers prices)
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
A.
Series A
3.1
3.9
5.8
8.1
9.2
10.3.
12:3
15.0
16.3
20.3
7/1/67 prices
"establisIment"' statistics
Index (1966 - 100)
100
126
187
261
297
332
397
484
526
655
B.
Series 6
7.0
16.3
current prices
"ccnmxlity" statistics
Series C
11.6
13.1
12.6
14.0
12.8
13.5
16.4
current prices
"establishrent" statistics
Sour-en
A. Appendix B, Table B-I, Row I.
B. Appendix 8, Table B-IV, Row I.
C. Appendix B, Table B-V, Row I.
170 207 234 . 225 250 229 241 ZYJ
CD CDC= =='CD ED
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I aLt. nl,l
0
0
c
C
C
C
small relative to the differences among the alternative MBMW
GVO statistics. The unexplained differences among these_GVO
statistics, therefore, are passed on to the MBMW residuals.
There are, moreover, other reported MBMW GVO statistics (see
p. 2 of this report) which also differ in an unexplained way
from those used in calculating these residuals. In 1966,
for instance, one might as well use MBMW GVO statistics in
July 1, 1955 prices as in July 1, 1967 prices. Were this to
be done, there would be yet another 1966 residual that would
differ in an unexplained way from those presented in this
paper.
Another major weakness of all the estimates is that
their composition is extremely uncertain. They almost
certainly include the value of missiles, artillery, combat
aircraft, naval ships, and all MBMW output of uniquely
military use.* But they may or may not include the value of
all military hardware prototypes used for RDT&E, common-use
durables such as trucks and construction equipment (and
possibly even transport aircraft and auxiliary ships), and
capital repair of military equipment. They probably do not
include the value of MBMW output produced for consumption by
military schools, hospitals, the administration of the MOD,
and institutes engaged in military RDT&E. (All of these are
likely to be included in public consumption.) They almost
certainly include the value of miscellaneous output not
classified with any of the categories of MBMW which were
subtracted from GVO in the residual calculations. The
"establishment" MBMW GVO statistics include some non-MBMW
output. But because of the uncertainty of the "commodity" to
"establishment" ratio, it is also uncertain whether non-MBMW
output remains in the "establishment" residuals.
Yet another problem with the estimates in Table 9 is
that in all three series the average annual rate of growth
is implausibly high: about 23 percent in series A, about 15
percent in series B, and almost 13 percent in series C.
Even the low growth series, moreover, grows at about 23
percent a year during 1967-70. These high rates of growth
probably arise primarily from the distortions introduced by
the mixing of data that differ in price or scope and
illustrate that it is unrealistic to expect accurate point
estimates of the value of Soviet military hardware from
analysis of MBMW data. To some extent, however, the high
* This may include hardware exports, the value of which
would not be included in defense spending as defined in US
budgetary accounts.
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A. Series A
771-76-7 prices "establish-
rent" statistics
B. Series B
current prices
"caniludity" statistics
C. Series C
current prices
"establistm nt" statistics
Table 10
Lower and Upper Limits of ruiN Residuals, 1966-75
(billions of rubles, producers' prices
1966 1967 1968 1969 1970 1971 1972 1973 1974 1975
-0.9- -0.2- 1.4- 2.5- 3.9- 4.2- 5.7- 7.4- 7.1- 10.2-
6.8 8.0. 10.1 13.4 14.4 16.2 19.0 22.5 .24.9 30.1
3.0-
10.9
9.7-
22.8
1.7- 2.8- 5.1- 6.0- 7.8- 6.6- 74 5.6- 4.9- 6.7-
9.4 11.1 13.9 16.8 18.2 18.3 20,4 ' 20.0 21.7 2S.6
Soarceo:
A. Append?-7x B, Tables B-II and B-III, Row I.
J. Appendix B, Table B-IV, Row I.
C. Appendix B. Tables B-VI and VIII, Row I.
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U
c
C
C
G
G
rates of growth may reflect the impact of the 1967 price
reform on the cost of military hardware(33) and the
inflation widely believed to be characteristic of Soviet
industrial output series. But the much criticized MBMW
producers' price index,. (34) which is based on a fixed
sample of goods that may not include military products,
cannot be used to deflate the residual series.
The margin for error in the annual estimates in each
series is yet another problem. The estimates in Table 10
are presented to give some sense of this. These estimates
were calculated from the same sets of MBMW GVO statistics as
the estimates in Table 9. However, instead of the best
estimates of non-defense MBMW production, the low and high
estimates were used. These were combined so as first to
minimize and then to maximize the annual residuals in each
series. It is extremely unlikely and, in instances where
negative values result, impossible that the "true" residuals
in any of the series would lie at either of the estimated
extremes. Still the width of the range between the lower
and upper limits does convey some impression of the margin
encountered would be greater.*
Because of the many data problems involved, analysis of
MBMW data is at present a rough and uncertain means of
estimating the value of Soviet military hardware. The
problems discussed in this report, moreover, are those
encountered in the analysis of historical data. If estimates
of the value of military hardware were made on the basis of
planned future changes in output, the problems and obstacles
for error involved in the annual estimates.
If analysis of MBMW data is to yield more credible
estimates of the value of Soviet military hardware, our
understanding of Soviet MBMW statistics must be improved.
Better understanding of the differences among the reported
and estimated MBMW GVO statistics and of the scope of the
statistics on non-defense MBMW uses is the most pressing
need. But there is also insufficient knowledge of the
* For 1979-80, for instance, MBMW GVO in 1/1/75 prices can'
be estimated from planned growth figures. But there is
insufficient data on MBMW employment, wages, profits and
incentive funds to estimate GVO in current prices for these
years (or for 1976-78). Moreover, except for investment
goods, for which planned growth figures in 1/1/73 prices are
available, the value of the civilian components of MBMW GVO
would be more difficult to estimate than for earlier years.
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relationship of foreign trade to domestic prices, the value
of MBMW consumer goods and capital repair, and the behavior
of Soviet prices. All of these are long-standing problems,
and their solution is not in sight. But until these
problems are solved, MBMW residual estimates of the value of
Soviet military hardware output will remain imprecise,
U
U
0
0
n
0
0
0
2;
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I
1
i
1
I
e
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Appendix A
Calculation of GVO
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Table A-I
'
Estimated NIDPb4 6110, 196
prices)
(billionT s 0 1967 rubles, producers
1970
1971
1972
1973
1974
1975
1960
1965
A.
Ir4er. of industrial GV0
44
86
100
108
115
123
133
143
8.
Industrial GVO
370
C.
Irx:ustrial GVO
162.8
244.2
370
399.6
425.5
455.1
492.1
529.1
. D.
1.1G 1.1 GVO As a Share of
InAustrial GVO
(percent)
16.6%
19. 94
23.0%
23.88
24.9%
25.9%
26.9%
27.81
E.
cnri?t cvo
27.0
48.6
85.1
95.1
105.9
117.9
132.4
147.1
Source::
A. t; ;r?, 1:1y' . 1975 (Moscow, 1976), p. 190-
B. lccor?;:~i3 to a Gucplan-published book, the Ninth Five-Year Plan oaiZed for industry's GVO to increase
b,,, 174 billion rubles which would represent a 47 percent increase over GVO in 1970 (USSR, Cosplan,
rlo kho"aystva SSSR na 1971-1975.9ody (Moscow, 1972),
Go,ud.rstyPn,ryi pyatiletniy plan rasvitiya narodno
-P;.) 7irtsa, indu . trial GVO- in 1 770 was 370 billion rubles.
P
P
C. The value in B is extrapolated to other years via the index in A.
D. Var. 6h,97. 1972 (tfoscow, 1973), p. 166; Nar. khoz. 1975, p. 197.
E. Row D x Row C.
c
Q= c 0 c J =. = = j
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c
c
c
C
C
G
r,
Note on Tables A-II through A-V
An often-used method of estimating the GVO of a given
branch of Soviet industry is to:
1. multiply the branch's reported wage fund* by one
plus the estimated rate of social insurance
contributions.
2. divide the result by the reported share of labor
and social insurance costs in total production
outlays, and
3. add reported profits to the quotient.(l)
For the years after 1966, however, this method must be
modified to yield accurate estimates. Since 1967 Soviet
statistics on average wages and wage funds have included
bonus payments from the material incentive. fund, the source
of which is profit.(2)** But bonuses paid from profit are
not included in production costs.(3) To estimate GVO from
labor costs and profit, therefore, one should:
1. multiply the branch'.s reported wage fund by one
plus the estimated rate of social insurance
contributions (the enterprise makes social
insurance contributions on most bonuses as well as
on regular wages) .(4)
2. deduct payments from the material incentive fund
derived from profits.
3. divide the result by the reported share of wages
and social insurance costs in total production
outlays.
4. add reported profits to the quotient.
In Table A-II this method is used to estimate
industrial GVO for 1966-75, and the results are compared
with the industrial GVO statistics reported in published
Soviet sources. Estimated GVO never differs from reported
GVO by more than 1.4 percent, and for eight of the ten years
in question the estimated values lie within 1 percent of the
reported values. In Table A-III, in contrast,, industrial
GVO is estimated by a similar method.but without deducting
*Soviet sources use the term "wage fund" in both a narrow
and a broad sense, the former excluding bonuses paid from
profit, the latter including such bonuses. In this note the
term is used in its broad sense.
**I am indebted to Professor Treml of Duke University for
calling this to my attention.
-29-
SECRET
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the payments from the material incentive fund. Over time
the estimated values grow steadily greater than the reported
values. By 1975 the estimated value is 8 percent greater
tha the reported value.
The method used in Table A-II, therefore, would appear
to be a better method of estimating GVO from labor costs and
profits than the method used in Table A-III. But because
Soviet published sources do not report the annual value of
payments from the material incentive fund of individual
branches of industry, the value of these payments must be
estimated to calculate MBMW GVO. In Table A-IV this is done
by assuming that the ratio of MBMW material. incentive
payments from profits to total reported MBMW wages is the
same as the ratio of all industrial material incentive
payments to total reported industrial wages. But Soviet
published sources indicate that the ratio of material
incentive payments to total wages varies from branch to
branch.(5) The calculated values of payments from the MBMW
material incentive fund., therefore, must be recognized as
estimates which may be in error.
1. This is the method used in W.T. Lee, The Estimation of
Soviet Defense Expenditures, 1955-75. An Unconventional
Approach, (New York, 1977), pp. 217-225.
2. N.A. Ivanov and G.I. Mechkovskiy (eds.) Ekonomika truda
(Moscow, 1976), p.344.
3. Ibid.
4. V.I. Terebilov (ed.) Kommentariy k zakonodatel'stvu o
trude (Moscow, 1976), p. 724.
5. Yu. Artemov, "Ekonomicheskiye granitsy fonda
material'nogo pooshchreniya," Voprosy ekonomiki_, 8
(1975), 37-38.
u
0
U
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Table A-II
Estimated and ReortalFi 1tatrial CVW 1966-75
(bill. ons of current ales
rs prices)
A.
Unadjusted Industrial Wage
FILM
36.901
40.061
44.517
47.735
50.549
53.002
55.347
58.081
62.381.
66.282
B.
x Social Ins. Adj..Factor
1.072
1.072
1.072
1.072
1.072
1.072
1.072
1.072
1.072
1.072
C.
Equals Unadjusted Vlage
Fund and Social Ins.
39.558
42.945
47.722
51.172
54.189
56.818
59.332
62.263
66.872
71.054
D.
Less Payrnts from Material
Incentive Fluid
---
.660
1.773
3.071
3.739
4.140
4.399
4.840
5.247
5.663
E.
Equals Adjusted Wage Fund
and Social Insurance
39.558
42.285
45.949
48.101
50.450
52.678
54.933
57.423
61.625
65.391
F.
Dividod by Share of E in
Production Cost 1
17.91
16.96
16.6%
G.
Lquals Production Cost
220.994
250.207
276.801
291.521
313.354
339.858
361.401 ?
387.993
41f.ie5
447.874
If.
Plus Profit
25.088
34.889
44.431
48.810
55.956
56.232
59.397
60.042
64.223
65.881
1.
Equals Estimated Industrial
GVO
246.082
285.096
321.232
340.331
369.31C
396.090
420.798
448.035
480.608
513.765
(
trj
n
J.
IC.
fk!ported Industrial GW
I : J
248.3
.991
285.9
?997
322..8
.995
345.0
.986
374.3
.987
395.7
1.001'
420.0
1.002
447.3
1.002
479.6
1.002
511.2
1.005
to
1-3
Sources:
A. "Chialennoet' it fond aarabotnoy platy rabochikh it eluahaohchikh po otraetyam promyohlennoeti SSSR," Veatnik statiatikt No.'4 (1971), 87;
No. 11 (1972), p. 93; No. 9 (1974). 94; No. 8 (1976), 89.
B. Allina Tretyakova, "Labor and Capital in the Soviet Union by Republica," Duke University - University of North Carolina Occasional Papers
on Coviet Input-Output Analynia No. 20 (Chapel Hill-Durham, 1977), p. 24.
C. Calculated.
D. Veatnik otatiatiki No. 7 (1970), 94; Var. khoa. 1969, p. 766; Nar. khoz. 1975, p. 737.
8. Calculated.
F. Yu. A'urnmov, Mnahdunarodna a e etetattsatetra rotaw detva (Moscow, 1988), p. 86; Nar, khoa. 1987 p. 225, Mar. khoa. 1968. P. 233; Mar. khoa. 1969,
11ar. k):,);.- 1970, 174; Nar. ion. 1922-19720 p. 167; Nor. khoa. 1972, p. 197; Aar. oaf 1973, p 2481 Mar. ego -1974; p. 2101
1/ r. khn-. 1976, p. 2J0. ,
C. Ca-Zulat-~c.
H. Air. khoa. 1968 p. 745; Nap. khoa. 1970. p. 705; Nar. khoa. 1975, p'. 727.
I. Calculate .
/. Nar. khoa. 1975 p. 191.
K. Ca7cu7ote .
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Table A-III
Estimated and Reported Industrial GW 1~966-75
(billions o currant rubles, p uTucer& prices)
A.
Unadjusted Industrial
Wage Fund
36.901
40.061
44.517
47.735
50.549
53.002
55.347
58.081
62.381
66.282
B.
x Social Ins. Adj. ractor
1.072
1.072
1.072
1.072
1.072
1.072
1.072
1.072
1.072
1.072
C.
Firuals Unadjusted Wage Fund
and Social Insurance
39.558
42.945
47.722
51.172
54.189
56.018
59.332
62.263
66.072
71.054
D.
Divided by Share of C in
Production Cost (%)
17.9%
16.9%
16.6%
16.5%
16.11
15.5%
15.21
14.8%
14.8%
14.6%
E.
Diuals Production Cost
220.994
254.112
287.482
310.133
336.578
366.568
390.342
420.696
451.838
486.671
F.
Plus Profit
25.088
34.809
44.431
48.810
55.956
56.232
59.397
60.042
64.223
.65.881
G.
Fjiuals Estimated
Industrial GVO
246.082
289.001
331.913
358.943
392.534
422.800
449.739 ?
480.738
516.061
552.552
H.
Reported Industrial GVO
248.3
285.9
322.8
345.0
374.3
395.7
420.0
447.3
479.6
511.2
1.
G e 11
.991
1.011
1.028
1.040
1.049
1.069
1.071
1.075
1.076
1.081
t1i
S.uro_:
n
A.
T le A-11,
Row A
'U
B.
Table A-II,
Row B
LT1
C.
Calculated
H
D.
Table A-17,
Row P
E.
Calculated
F.
Table A-II.
Row R
G.
Calculated
H.
Table A-1I,
Row J
I.
Calculated
1 D
iZ=
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Table A-IV
Estimated Pa
is frun Milhbl It tcrial Incentive Fluid, 1967-75
wns o current rubles, p ucers
prices
A.
Unadjusted Industrial
Wage Ftud
40.061
44.517
47.735
50.549
53.002
55.347
58.081
62.381
66.282
S.
Payments fr+an Material
Incentive Fund
.660
1.773
3.071
3.739
4.140
4.399
4.840
5.247
5.663
C.
B t A
.0165
.0398
.0643
.0740
.0781
.0795
.0033
.0841
.0854
D.
Unadjusted MM Wage Fled
14.695
16.538
18.160
19.378
20.735
22.049
23.414
25.377
27.209
E. C x D =Pui19 Payments from
.242
.658
1.168
1.434
1.619
1.753
1.950
2.134
2.324
Material Incentive Fled
Sow?cae:
A. Table A-II, Row A
B. Table A-11, Row D
C. Calculated
V. An in Table A-II, footnote A
E. Calculated
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Table A-V
Estimated MI I'J CMR), 1966-75
(billions of current esrul~I pralucers' prices)
1966 1967 1968 1969 1970 1971 1972 1973 1974 1975
A. Unadjusted mW Wage Fund 13.426 14.695 16.538 18.160 19.378 20.735 22.049 23.414 25.377 27.209
B. x Social Ins. Adj. Factor 1.077 1.077, 1.077 1.077 1.077 1.077 1.077 1.077 1.077 1.077
C. Equals Unadjusted Wage
Fund & Social Ins. 14.460 15.827 17.811 19.558 20.870 22.332 23.747 25.217 27.331 29.304
D. Less MUW Material
Incentive Fund Paid Out
from Profits --- .242 .658 1.168 1.434 1.619 1.753 1.950 2.134 2.324
E. Equals MNII page FLM
Included in Production Cost 14.460 15.585 17.153 18.390 19.436 20.713 21.994 23.267 25.197 26.980
F. Divided by Siktre of E
in Production Cost 28.91 27.6% 27.08 26.6% 25.61 25.1% 24.6% 24.3% 24.09 23.6%
G. -E uals Production Cost 50.035 56.467 63.530 69.135 75.922 82.522 89.407 95.749 104.988 114.322
H. Plus Profit 8.710 9.715 10.929 12.015 13.887 12.847 14.834 13.083 14.742 16.660
1. Equals Estimated M13FW GVO 58.745 66.182 74.459 81.150 09.809 95.369 104.241 100.832 119.730 130.982
A. Toile A-IV, Row D
B. 6'..:. Fis%ov and M.L. Zakharov, Soteial'noye obeapecheni!e i strakhovaniye v SSSR (Moscow, 1972),
li:yhalt.rakiy uchet v promyehlennooti. Uchebnoye pooobi.ye (Moscow, 1974), p. 56.
C. Calcuiated
D. :able A-IV, Row E
E. Calculated
F. As in 'able A-ll.footnote F
C. Calculated
H. As in Table A-I , footnote H
1. Calculated
PP.
392-93; I.A. Boyarskiy pnd Ya. L. Vayefet'd,
(
trj
C)
tri
t-3
117-1 ? 0 E__3 E _ J LID F-71 LID [ID . E777D [=] E=
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Appendix B
MBMW Residual Calculations
-35-
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Table B-I
Best m Residuals, 1966-75 (billions of July 1, 1967 rubles, producers' prices)
Establishrent Statistics
1966
1967
196S
;,. 1970
1969..:.
1971
1972
1973'
1974
1975
A.
M . : 1 1 GVO
54.3
61.1
68.7
,
76.3 84.8
94.1
105.2
.
117.9
131.4
146.7
B.
Less Intexirediate Use
22.5
25.8
29.4
33.2 . 37.5
42.3
48.1
54.7
62.0
70.3
C.
Equals Final Use NB
31.8
35.3
39.3
43.1 47.3
51.8
57.1
63.2
69.4
76.4
D.
Less Dcpor.ts
1.4
1.6
1.8
2.0 2.1
2.3
2.6
2.9
3.4
3.8
E.
Pius Imports
2.3
2.6
3.1 .
3.5 3.8
3.8
4.6
5.3
6.1.
9.0
F.
Less Investments 1.
16.9
18.2
19.4
21.0 22.9
24.4
26.4
28.7
31.9
35.6
2.
0.2
0.8
0.8
-0.1 -0.1
0.1
0.1?
0.1
0.6
0.6
3.
1.0
1.1
1.1
1.2 1.2
1.3
1.3
.1.4 .
1.4
.1.5
G.
Less Consucrption
4.8
5.2
5.9
6.4 7.2
8.1
9.3
10.1
10.9
11.9
H.
Less Capital Repair
6.7
7.1.
7.6
8.0 8.6
9.1
9.7
10.3
11.0
11.7
1.
Equals t?;H: y9 Residuals
3.1
3.9
5.8
8.1 9.2
10.3
12.3
15.0
16.3
20.3
J.
As Share of M41 GVO
5.7%
6.4%
8.4%
10.6% 10.88
10.9%
11.7%
12.7%
12.4%
13.8%
K.
Indcx (1966 - 100)
S~;~rce.;
~.
Iu.ile 1, Row D
F.
Table 4, Row E
I.
Calculated
Li.
A x Row A of Table 2.
Table 5, Row B (rounded)
J.
I + A
C.
A - B .
Table 6, Column D
K.
Calculated
D.
E.
Tale 3 Row A-3 (rounded)
Table 3, Row b-3 (rounded)
0.
Al.
Table 7, Row C
Table 8, Row B
1= I o F-11 F-71
T
F-I
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Table B-II
Low Ma Residuals, 1966-75 (billions of July 1, 1967 rubles, producers' prices)
..Establishment Statistics
1966
1967
1968 .
1969
.1970
1971
1972
1973
1974.
1975
A.
MfI6 GVO
54.3
61.1
68.7
76.3
84.8
94.1
105.2
117.9
131.4
146.7
B.
Less Intermediate Use
23.1
26.4
30.1
34.0
38.4
43.4
49.2
56.0.
63.5
71.9
C.
Equals Final Use MBMW
31.2
34.7
38.6
42.3
46.4
50.7
56.0
61.9
67.9
74.8
D.
Less Exports
1.7
1.8
2.1
2.4
2.5
2.7
3.0
3.4
4.0
4.5
E.
Plus Imports
1.6..
1.9
2.2
2.5
2.7
2.7
3.3
3.8
4.3
6.4
F.
Less Invesutents 1.
18.1
19.6
20.5
23.0
24.2
26.2
28.3
31.0
35.0
38.4
2.
0.2 .
0.8
0.8 .
.-0.1
-0.1
0.1
0.1
0.1
0.6
0.6
3.
1.0.
1.1
1.1
1.2
1.2
1.3
1.3
1.4
1.4
1.5
G.
Less Consumption
5.3
5.7
6.5.
7.0
7.9
8.9
10.2
11.1
12.0
13.1
H.
Less Capital Repair
7.4
7.8
8.4
8.8
9.5
10.0
10%7
11.3
12.1
12.9
n
I.
Equals M41 Residuals
-0.9
-0.2
1.4
2.5
3.9
4.2
5.7
7.4
7.1
10.2
H
J.
As Share of 1411,14 GVO.
--"'
----
2.0%
3.3%
4.6%
4.5%
5.4%
6.3%
5.4%
7.0%
K.
Index (1968 - 100)
----
----
100
179
279
300
407 .
529
50?
?29
Source.
A.
Table 1, Row D
C.
Table ?, Row B
B.
A x Row C of Table 2.
U.
Table 8, Row D
C.
A - B
I.
Calculated
D.
Table 3, Row A-4 (rounded)
J.
I + A
E.
Table 3,Row B-2 (rounded)
K.
Calculated
F.
Table 4, Row F
Table 5, Row B (rounded)
Table 6, Column D
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Tablo B-III
High Mfl44 Residuals, 1966-75 (billions of July 1, 1967 rubles, producers' prices)
9sthblisisnent Statistics
1966
1967
1968
1969 1970
1971
1972
1973
1974
1975
A.
M1n1 GVO
54.3
61.1
6C.7
76.3 84.8
94.1
105.2
117.9
131.4
146.7.
B.
Less Internediate Use
22.0
25.2
28.7
32.4 36.5
41.3
46.9
53.4
60.6
68.7
C.
Equals Final Use MBNb4
32.3
35.9
40.0
43.9 48.3
52.8
58.3
64.5
70.8
78.0
D.
Less Exports
1.2
1.3
1.5
1.7 1.8
1.9
2.1
2.4
2.8
3.2
E.
Plus Imports
2.9
.3.3
3.9
4.4 4.7
4.8
5.8
6.7
7.6 ,
11.3
F.
Less Invesbrents 1.
15.7
16.9
18.3
19.1 21.5
22.6
24.5
26.4
29.0
32.7.
2.
0.2
0.8
0.8 .
,-0.1 -0.1
0.1
. 0.1.
0.1
0.6
0.6
3.
1.0.
1.1
1.1
1.2 1.2
1.3
1.3
1.4
1.4
1.5
G.
Less Consumption
4.3
4.7
5.3
5.8 6.5
7.3
8.4
9.1
9.8
10.7
H.
Less Capital Repair
6.0
6.4
6.8
7.2 7.7
8.2
a.7
9.3
9.9
10.5
1.
Equals M11rJ Residuals
6.8
8.0
10.1
13.4 14.4
16.2
19.0
22.5
24.9
30.1
J.
As Share of lic%W GVO
12.5%
13.1%
14.7%
17.6% 17.0%
17.2%
18.1%
.19.1%
18.9%
20.5%
K.
Index (1966 = 100)
100
118
149
197 212
238
279
331
366
443
Sour-Ceti:
A. Table 1, Row D
F. Table 4, Row D
I. Calculated
B. A x Row a or Table 2
Table 5, Row B (rounded)
J. I ? A
C. A D
Table 6, Column D
K. Calculated
D. Table 3, Row A-2 (rounded)
0. Table 7, Row E
E. Table 3, Row B-4 (rounded)
H. Table 8, Row C
I1J E = = 0, ? = = C= - 11-1 Q
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Table B-IV
Mw Residuals for 1966 and 1972 (billions of current rubles, producers' prices)
Canmodity Statistics
Low
best
11
Ida
Best
High
A.
M8I4d GVn
61.1
61.1
61.1
108.5
108.5
108.5
B.
Less Intermediate Use
26.0
25.4
24.7
50.8
49.6
48.4
C.
Equals Final Use M44
35.1
35.7
36.4
57.7
58.9
60.1
D.
Less Exports
1.7
1.4
1.2
3.0
2.6
2.1
E.
Plus Inports
1.6
2.3
2.9
3.3
4.6
5.8
F.
Less Investment 1.
18.1
16.9
15.7
27.5
25.6
23.8
2.
0.2
0.2
0.2 .
0.1
0.1
0.1
3.
1.0.
1.0
1.0
1.3
1.3
1.3
G.
Less Consunption
5.3
4.8
4.3
8.7
7.9
7.1
11.
Less Capital Repair
7.4
6..7
6.0
10.7
9.7
8.7
CI)
C)
I.
Equals MD14J Residual
3.0
7.0
10.9
9.7
16.3
22.8
C)
tII
J.
As Share of 1I14I GVO
4.9%
11.5%
17.8%
8.9%
15.0%
21.0%
tII.
H
H
sources:
A.
Table 1, Row E
G.
Table 7, Rows D, F
B.
A x Rows A-C of Table 2
H.
Table 8, Rowe B-D
C.
A - B
I.
Calculated
D.
Table 3,
Rows A-2 - 4 (rounded)
J.
I + A
E.
F.
Table 3,
Table 4,
Table 5,
Table 6,
Rowe B-2 - 4 (rounded)
Rows R-J
Row B (rounded)
Column D
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Table B-V
Best MR Residuals, 1966-75 (billions of current rubles, producers' prices)
Establishment Statistics
1966 1967 1968 1969. '1970 1971
A. N:3.`A GVO
B. Less Intermediate Use
C. Equals Final Use M?
D. Less Exports
E. Plus .Imports
F. Less Investnnts 1.
2.
3.
G. Less Consuu rption
H. Less Capital Repair
I. Equals MMA Residuals
J. As Share of M04 GVO
K. Index (1966 = 100)
Sources:
A. Table 1, Row F
B?. A x Row A of Table E
C. A-B
D. Table 3, Row A-3 (rounded)
E. Table 3, Row B-3 (rounded)
r--1 r---l 11-1
58.7 66.2 74.5 81.1 89.8 95.4
24.4 27.9 31.9 35.3 39.7 42.9
34.3 ?38.3 42.6 .45.8 50.1 52.5
1.4 1.6 1.8 2.0 2.1 2.3
2.3 2.6 3.1 3.5 3.8 3.8
1972.' 1973 1974 1975
104.2
47.6
56.6
2.6
4.6
108.8 119.7 131.0
50.5 56.5 62.7
58.3 63.2 68.3
2.9 3.4 3.8
5.3 6.1 9.0
16.9 18.2 19.3 20.7 22.5 23.8 25.6 27.7 30.6 33.9
0.2 0.8 0.8 -0.1 -0.1 0.1 0.1 0.1 0.6 0.6
1.0 1.1 1.1 1.2 1.2 1.3 1.3 1.4 1.4 1.5
4.8 5.1 5.6 5.9 6.5 7.1 7.9 8.4 8.8 9.4
6.7 7.1 7.6 8.0 8.6 9.1 9.7 10.3 11.0. 11.7
5.6 7.0 9.5 11.6 13.1 12.6 14.0 12.8 13.5
9.5% 10.6% 12.8% 14.3% 14.6% 13.2% 13.4% 1.1.R% 11.3%
100
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234 225 250 229 241
F. Table 4, Row I I. Calculated
Table 5, Row B (rounded) J. I + A
Table 6, Column D K. Calculated
G. Table 7, Row D
H. Table 8, Row B
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Table B-VI
Low MM Residuals, 1966-75 (billions of current rubles, producers' prices)
Establishment Statistics
F. Less Investments 1.
2'
3.
Less Exports
Plus Imports
G. Less Consumption
H. Less Capital Repair
I. Equals MEW Residuals
J. As Share of M&M GVO
K. Index (1966 = 100)
1966 1967 1968 1969 1970 1971
58.7 66.2 74.5 81.1 89.8 95.4
24.9 28.6 32.6 .36.1 40.7 44.0
33.8 37.6 41.9 .45.0 49.1 51.4
1.7 1.8 2.1 2.4 2.5 2.7
1.6 1.9 2.2 2.5 2.7 2.7
18.1 19.6 20.4 22.7 23.8. 25.6
0.2 0.8 0.8 '-0.1 -0.1 0.1
1.0 1.1 1.1 1.2 1.2 1.3
5.3 5.6 6.2 6.5 7.1 7.8
7.4 7.8 8.4 8.8 9.5 10.0
1.7 2.8 5.1 6.0 7.8 6.6
2.9% 4.2% 6.8% . 7.4% 8.7% 6.9%
100 185 300 153 459 388
1972
1973
1974'
1975
.104.2
108.8
119.7
-'131.0
48.8
51.7
57.8
64.2
.55,4
57.1 .
61.9
66.8
U)
3.0
3.4
4.0
4.5
n
3.3
3.8
4.3 .
6.4
H
27.5 .
29.9
33.5
41;. 0;
0.1
0.1
0.6
0.6
1.3
1.4 ?
1.4
.1.5
8.7
9.2
9.7
10.4
10.7
11.3
12.1
12.9
7.4
5.6
4.9
6.7
7.1%
5.1%
4.1%
5.10
435
329
R88 .
394
Sources:
A. Table 1, Rory F F. Table 4,. Row J I. Calculated
B. A x Row C of Table 2 Table 5, Row B (rounded) J. I a A
C. A - B Table 8, Column D X. Calculated
D. Table 3, Row A-4 (rounded) C. Table 7, Row F
E. Table 3, Row B-2 (rounded) B. Table 8, Row D
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A. MBN? GVO
B. Less Intermediate Use
C. Equals Final Use MEW
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Table B-VII
High MW1W Residuals, 1966-7 (billions of current rubles, producers' prices)
Establishment Statistics
A. N'.BM GVO
B. Less Intermediate Use
C. Equals Final Use MELM l
D. Less Exports
E. Plus Imports
F. Less Invest7merits 1.
2.
3.
G. Less Consumption
H. Less Capital Repair
I. Equals MAI Residuals
J. As Share of M&'-V GVO
K. Index (1967 = 100)
Sources:
A. Table 1, Row F
B. A x Row B of Table 2
C. A-B
D. Table 3, Row A-2 (rounded)
E. Table 3, Row B-4 (rounded)
1966 1967 1968. _ 1969.
58.7 66.2 74.5 81.1
23.8 27.3 31.1 34.5
34.9' 38.9 43.4 46.6-
1.2 1.3 1.5 1.7
2.9 3.3 3.9 4.4
15.7
0.2
1.0
16.9 18.2 18.9
0.8 0.8 -0.1
1.1 1.1 1.2
5.3
6.4 . 6.8 7.2
11.1 13.9
16.8% 18.7%
16.8
20.7%
100 118 ' 148 . 179.
1970
1971'
1972
1973
1974'
- 1975
89.8
95.4
104.2
108.8
119.7 ?'
131.0
38.7
41.9
46.5
49.3
55.2
61.3
51.1
53.5
.57.7
59.5
64.5
69.7
1W
1.8
1.9
2.1
2.4
2.8
3.2
4.7
4.8
5.8
6.7
7.6
11.3
21.1
22.1
23.8 '
25.4
27.8
31.2
-0.1
0.1
0.1
0.1
0.6
0.6
1.2
1.3
1.3
1.4
1.4
5.9
6.4
7.1
7.6
7.9..
8.4
7.7
8.2
8.7
9.3
9.9
. 10.5
18.2
18..3
20.4
20.0
21.7
25.6
20.3%
19.2%
19.6% .
18.4%
18.1%
19.5%' 1
194 195 217 213 231 272
F. Table 4, Row H
Table 5, Row B (rounded)
Table 6, Column D
G. Table ?, Row F
H. Table 8, Row C
I. Calculated
J. I.A
K. Calculated
t d I L 0 = L L L L
U:
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U SECRET
0
0
0
0
0
0
0
0
0
D
a
a
D
Source References
1. USSR, Gosplan, Metodicheskiye ukazaniva k sostavleniyu
gosudarstvennogo plana razvitiya narodnogo khozyaystva
SSSR (Moscow, 1969), pp. 709-23; Metodicheskiye
ukazaniya k razrabotke.gosudarstvennykh planov razvitiya
narodnogo khozyaystva SSSR (Moscow, 1974), pp. 713-28.
2. Narodnoye khozyaystvo SSSR v 1968 godu. Statisticheskiy
yezhegodni.k (Moscow, 1969), p. 254.
3. The literature on the estimation of military hardware
output from MBMW data is extensive. The major
unclassified works include Abraham S. Becker, Soviet
Military Outlays Since 1955, Rand Corporation Memorandum
RM-3886-PR, (Santa Monica, 1964), esp. pp. 41-50, 85-90
Michael Boretsky, "The Technological Base of Soviet
Military Power," in Joint Economic Committee, U.S.
Congress, Economic Performance and the Military Burden
in the Soviet Union (Washington, D.C., 1970), pp.
189-231; Stanley H. Cohn, Estimation of Military
Durables Procurement Expenditures From Machinery
Production and Sales Data, SRI International Informal
Note SSC-IN-78-13 (Arlington, VA, 1978) and William T.
Lee, The Estimation. of Soviet Defense Expenditures,
1955-75. An Unconventional Approach (New York, 1977).
4. The yearbooks in question are those in the series
Narodnoye khozyaystvo SSSR. But a 1961 yearbook in
another series reported MBMW GVO for 1960 and projected
MBMW GVO for 1965, 1970, and 1980. SSSR v tsifrakh v
1961 godu. Kratkiy statisticheskiy sborni-k (Moscow
1962), pp. 108-109.
5.
Nar. khoz. 1975 (Moscow,
1976),
p.
784.
(This describes
the index of industrial
output,
but
the
description
applies to the indexes of the branches of industry as
well.
6. N.I. Tsybakin, "Sistema pokazateley tekhnickeskogo
urovnya mashinostroyeniya," Ekonomika i organizatsiya
promyshlennogo proizvodstva, No. 5 (Nov. 1976), p. 92.
7. Yu. K. Kozlov, Razvitiye i razmeshcheniye
mashinostroyeniya SSSR (Moscow, 1974), p. 34.
8. See for example, the following table:
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L
(Billions of Rubles, Producers' Prices)
1960
1965
A.
Reported MBMW GVO in
July 1, 1967 prices
27.0
48.6
B.
1967/1955 price ratio
(I)
.769
.769
C.
1967/1955 price ratio
(II)
.922
.922
D.
A : B
35.1
63.2
E.
A : C
29.3
52.7
F.
Reported MBMW GVO in
July 1, 1955 prices
34.0
61.0
v
A. Table 1, Row C.
B. This is the ratio of
the MBMW producers'
economic yearbooks.
1967
to 1955 prices according to
price
index reported
in
Soviet
Nar.
khoz. 1975, p.
231.
C. This is the ratio of July 1, 1967 comparable prices to
July 1, 1955 comparable prices reported by two Gosplan
officials. P. Krylov and P. Kanunikov, "Ispol'zovaniye
sopostavimykh optovykh tsen v planirovanii," Planovoye
khozyaystvo 9 (Sept. 1977) , p. 63.
D. Calculated
E. Calculated
F. Statistics are from Soviet sources as reported by W.T.
Lee, The Estimation of Soviet Defense Expenditures, pp.
157-60.
9. A.A. Shaporov, "Narodnokhozyaystvennoye znacheniye
nauchno-tekhnicheskogo progressa v mashinostroyenii," in
D.S. L'vov (ed.) Ekonomicheskiye problemy razvitiya
mashinostroyeniya, Sbornik statey (Moscow, 1975), p. 7.
10. Sotsial'isticheskaya industriya, Apr. 7, 1971, p. 4.
11. Nar. Khoz. 1972 (Moscow, 1973), p. 197.
12. Yu. M. Shvyrkov, "Klassifikatsiya otrasley i produktov v
mezhotraslevom balanse," in A.N. Yefimov & I.Ya. Berri,
Metody planirovaniya mezhotraslevykh proportsiy (Moscow,
1965), p. 81-
13. Let: 1)"commodity" to "establishment" ratio = R
2) non-MBMW produced by MBMW establishments
"establishment" MBMW GVO = x
3) MBMW'produced by non-MBMW establishments
"establishment" MBMW GVO = y
R = 1 - x + y
For 1959 published Soviet sources have reported the
values of R (0.92 - see footnote 12) and x (0.145 - M.R.
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0
n
r
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U
Eidelman, Mezhotraslevoy.balans obshchestvennogo
rodukta (Moscow, 1966), p. 199. The value of y,
therefore, was 0.065.
c
C
c
For subsequent years published Soviet sources have
not reported the values of R or Y. But one Soviet
economist (see p. 15 of source in footnote 9) has
reported that the value of x was 0.14 in 1970 and was
scheduled to decrease to 0.11 by 1975.
Apparently x was fairly constant at 0.145-0.14
during 1959-70. If y was also roughly constant--at about
0.065-0.060--, then R was about 0.92 throughout that
period. Thereafter, x was scheduled to decrease. If y
decreased at the same rate R would have increased
slightly during 1970-75. (Because x was greater than y,
the change in x would outweigh the change in y).
14. P.G. Lyutko, Planirovaniye i analiz -struktury
obshchestvennogo proizvodstva respubliki (Minsk, 1976),
p. 9.
15. W.T. Lee, The Estimation of Soviet Defense Expenditures,
pp. 59, 63.
16. In 1972, for example, a Soviet economist reported that
intrabranch purchases of MBMW were 28 percent of MBi4W
GVO in 1970, and implied that they would increase to
about 29 percent of MBMW GVO in 1975. (A. Lalayants,
"Opredeleniye materialoyemkosti obshchestvennogo
proizvodstva," Planovoye khozyaystvo, 2 (Feb. 1972),
12). But another Soviet economist reported that the
share of intra-branch purchases in MBMW GVO was
scheduled to increase by approximately 10 percent during
1971-79. This implies that the share of intra-branch
purchases would grow at about double the rate implied by
the earlier reports (R.A. Buzunov, "Metod
mezhotraslevogo balansa v planirovanii razvitiya
mashinostroyeniya," in L'vov (ed.) Ekonomicheskiye
problemy, p. 113.
17. On the question of-whether prototypes are included in
MBMW GVO see W.T. Lee, The Estimation of Soviet Defense
Expenditures, pp. 167-71.
18. Barry Kostinsky and Vladimir G. Treml, Foreign Trade
Pricing in the Soviet Union: Exports and Imports in the
1966 Input-Output Table (Foreign Economic Report No. 8,
Washington, D.C.: US Dept. of Commerce, Mar. 1976), p.
10-11.
19. W.T. Lee, The Estimation of Soviet Defense Expenditures
p. 206.
20. Kostinsky and Treml, Foreign Trade Pricing, pp. 27-33.
21. Barry Kostinsky, Descrip on and Analysis of Soviet
Foreign Trade Statistics (Foreign Economic Report No. 5,
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U
r
Washington, D.C.: US Dept. of Commerce, Jul. 1974), p.
44.
22. As in Becker, Soviet Military Outlays Since 1955, pp.
86-88.
23. As in Lee, The Estimation of Soviet Defense
Expenditures, pp. 191-99.
24. As in Rush V. Greenslade, "Industrial Production
Statistics in the USSR", in Treml & Hardt (eds.)
Soviet Economic Statistics (Durham, N.C., 1972), pp.
180-181.
25. As suggested by Boretsky ("The Technical Base of Soviet
Military Power", p. 229) who estimates that
transportation charges are equal to 5 percent and
non-MBMW products equal to "between 5 and 10 percent" of
the reported value of equipment, tool, and inventory.
26. Ekonomika stroitel'stva # 6 (June 1974), 73-76
(unattributed answers to readers' questions).
27. John Pitzer, "Reconciliation of Gross National Product
and Soviet National Income," unpublished paper presented
at a NATO colloquium, July 1977, pp. 28-29.
28. Nar. khoz. 1964 (Moscow, 1965), p. 582.
29. Franklyn D. Holzman, Financial Checks on Soviet Defense
Expenditures (Lexington, Mass., 1975), p. 21.
30. V. Treml, D. Gallik, and B. Kostinsky, "1966 Ex Post
Input-Output Tables for the USSR: A Survey," in V.
Treml (ed.) Studies in Soviet Input-Output Analysis (New
York, 1977).
31. Foreign Demographic. Analysis Division (FDAD), U.S.
Department of Commerce, "The Reconstructed Soviet
Input-Output Table for 1972 in Producers' Prices,"
unpublished tables, 8 December 1977.
32. The rationale for the inclusion of military purchases in
capital repair would be the same as that for the
inclusion of such purposes in new investment. See
Pitzer, "Reconciliation of Gross National Product and
Soviet National Income," p. 33.
33. In 1974 a publication of the USSR Ministry of Defense
reported that the 15 percent increase in announced
Soviet spending for defense between 1967 and 1968 was
related to the 1967 price reform-- P.V. Sokolov,
Politicheskaya ekonomiya: Sotsializm--Pervaya faza
kommunisticheskogo sposoba proizvodstva (Moscow, 1974)
p. 294.
34. On the MBMW producers' price index see Abraham S.
Becker, "The Price Level of Soviet Machinery in the
1960's," Soviet Studies,, 26,No. 3 (July 1974), 363-67.
E
E
C
U
r
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^
Annex 1
1
I
t
t
I
Comparison of MBM44 Residuals with
CIA Estimates of Soviet Military Machinery
Purchases
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Annex 1
Comparison of MBMW Residuals with CIA Estima
of Soviet Military Machinery Purchases
The purpose of this annex is to compare the three
series of estimates presented in the basic paper with
CIA's direct-costing estimates of Soviet military
machinery purchases.
The comparison is a difficult one for two reasons.
First, the estimates based on MBMW data are residuals of
uncertain composition and, therefore, there is
uncertainty about what components of the direct-costing
estimates they should be compared to. Second, some of
the estimates based on MBMW data are expressed in 1 July
1967 prices and others are in current prices, but the
CIA estimates are in 1970 prices.
To deal with the uncertainty about the composition
of the residuals, two separate direct-costing estimates
were calculated. The first--CIA Narrow--is an estimate,
admittedly somewhat subjective and difficult to
substantiate, of what the MBMW residuals are most likely
to include. It includes all Soviet military machinery
purchases less purchases of military hardware prototypes
used for RDT&E, common-use durables such as trucks and
construction equipment, machinery purchased for
consumption by military schools, hospitals, etc.,
capital repair of military equipment, and ammunition and
nuclear materials.* As the working paper explains,
there is great uncertainty as to whether these specified
types of products are included in the residuals. Here ,
*Ammunition and nuclear materials are produced in
MBMW establishments, but it is uncertain whether they
would be classified as MBMW output in "commodity" as
well as in "establishment" terms. Also, for the reasons
discussed on page 26 of the working paper it is
uncertain whether they are included in either the
"establishment" or the "commodity" residuals.
SECRET
E
P
25X1
25X1
Li
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D
0
0
0
however, it is assumed that they are not included.* If
this assumption is incorrect, this would have a major
impact on the comparison of the residuals and the
direct-costing estimates. The second direct-costing
estimate--CIA Broad--is presented to give some sense of
how great this impact could be. It includes all Soviet
military machinery purchases.
To deal with the price differences among the
estimates the MBMW residuals were converted to the 1970
prices in which the CIA estimates are expressed. This
was done with two indices of MBMW prices which are
described in another CIA working paper. These indices,
it should be noted, purport only to reflect the changes
in MBMW prices in general rather than of military
hardware prices in particular. Their use in the annex
is not intended as an endorsement of the indices as
measures of the changes in military prices. (The price
indices, the unadjusted residuals, the residuals in 1970
prices, and the CIA estimates are presented in a summary
table appended to this annex) .
Figures 1, 2, and 3 compare each of the three
series of estimates based on MBMW data with CIA's
direct-costing estimates of Soviet military machinery
purchases. The Series A residuals in Figure 1
originally were calculated in 1 July 1967 prices from
reported statistics on MBMW GVO in "establishment"
terms. The Series B residuals in Figure 2 originally
were calculated in current prices from estimates of MBMW
GVO:in "commodity" terms. (The original series included
residuals only for 1966 and 1972. The other residuals in
*Pitzer maintains that except for ammunition and
nuclear materials (see above) the specified types of
output are not included in the residuals
("Reconciliation of Gross National Product and Soviet
National Income", p. 33). Lee is less explicit on the
composition of the residuals, but apparently defines the
residuals in much the same fashion as Pitzer (The
Estimation of Soviet Defense Expenditures, pp. 32-33,
36, 40) .
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Figure 1
C,;r?AAISOH OF Mi3 cU RESIDUALS UITH CIA ESVIMATES
(Billions of 1970 Rubles)
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C I
t'i In
d I
to
y
CDtIPARISON OF none RESIDUALS UITH CIA ESTIMATES
(Billions of 1970 Rubles)
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Figure 3
CCF?ARISQAT OF 118RU RESIDUALS UITH CIA ESTI19ATiES
(Bili~ons of 1970 Rubles)
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G
0
G'
C
0
0
the residuals.
Figure 2 were interpolated or extrapolated.)** The
series C residuals in Figure 3 originally were
calculated in current prices from estimates of MBMW GVO
in "establishment" terms which were based on labor
costs, their share in production outlays and reported
profits. All three figures include high, best, and low
estimates of the MBMW residuals. These differ because
of differences in the estimates of non-defense
production which were subtracted from GVO to calculate
those based on direct-costing is deceptive.
With respect to their level and overall trend the
residuals in Figures 1, 2, and 3 provide some modest
support to the direct-costing estimates. After 1968 the
best estimates of the residuals in Series B and C are
not greatly different from the CIA Narrow estimates.
However, these data should be interpreted cautiously.
The residuals may include the value of military hardware
exports shipped from current production, while the
direct costing estimates do not. The Series A residuals
are substantially different from the direct-costing
estimates and the "true" residuals in all three series
could fall within a wide range. Also and most
important, if the residuals are not similar in
composition to the CIA Narrow estimates, the approximate
equivalence between the estimates based on MBMW data and
On balance, all three residual series also support
the direct-costing estimates in indicating a general
upward trend in Soviet military machinery purchases.
Again, however, the data should be interpreted
cautiously. The low estimates of the residuals in Series
B and C do suggest the possibility of flat or slightly
decreasing spending in the 1970s.
With respect to the precise rates of growth which
they reflect, the residuals provide less support to the
direct costing estimates. Even when converted to 1970
prices, all three residual series grow much more rapidly
than the CIA Narrow estimates for the period 1966-75 as
**In both 1966 and 1972 the values of MBMW output
from which the Series B residuals were calculated were
4.1 percent larger than those used to calculate Series
C. This relationship was assumed to have prevailed
throughout 1966-75, thus allowing for the calculation of
a complete time series of "commodity" residuals.
c
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SECRET L,
a whole. The best estimates in Series A grow at an
average of almost 20 percent a year and the best
estimates in Series B and C grow at average annual rates
of about 11 and 12 percent while the CIA Narrow
estimates grow at an average annual rate of about 5
percent.* In large part, however, the difference in
growth rates is due to the rapid growth of the residuals
in 1967-68. This, in turn, may be due to the failure of
the price indices to reflect the full impact which the
1967 price reform is believed to have had on military
hardware prices.** For the 1969-75 period the best
estimates of the residuals in Series B and C grow at
average rates much closer to that of the CIA Narrow
estimates (5.9 percent and 5.8 percent vs. 4.2 percent).
Moreover, for 1970-75 the average annual growth rates of
the best estimates in Series B and C and the CIA Narrow
estimates are almost the same (5.6 percent, 5.5 percent
and 5.2 percent). Even after 1968 the best estimates in
Series A grow much more rapidly than the CIA Narrow
estimates, but on the grounds of the non-homogeneity of
the data used to calculate them the Series A residuals
are the weakest of the three residual series.
The conclusions to be drawn from Figures 1, 2, and
3 are far from clear-cut, but given the failings of the
estimates based on MBMW data, things could not be
otherwise. The MBMW residual series are mutually
inconsistent, imprecise, and ill-defined. Consequently,
they do not allow for authoritative judgments on the
accuracy of other estimates.
*All growth rates discussed here were calculated using
the least squares method.
** See footnote 33 to page 23 of the working paper.
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Annex Table 1
CIA Estimates of Soviet Military Machinery Purchases and MBMW Residuals, 1966-1975
(Billions of Rubles, Producers' Prices)
1966 1967 1968 1969 1970 1971 1972 1973 1974 1975
W
tl
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1
1. CIA estimates (in 1970 rubles)
a. Broad Estimate
b. Narrow Estimate
2. Series A Residuals
a. Hig Estimate
b. Best Estimate
c. Low Estimate
(7/1/6.7 Prices) 1
3. Series B Residuals
.a. Higi stimate
b. Best Estimate
c. Low Estimate
(Current Prices)2
4. Series C Residuals (Current Prices) 1
a. Hig Estimate
b. Best Estimate
c. Low Estimate
S. Price Indices
a. In ex of Disguised Inflation
in 7/1/67 MBMW Prices
b. Index of Current MBMW Prices
6. Series A Residuals (1970 Prices)1
a. High Estimate
b. Best Estimate
c. Low Estimate
7. Series B Residuals (1970 Prices)2
a. High Estimate
b. Best Estimate
c. Low Estimate
8. Series C Residuals (1970 Prices) 1
a. High Estimate
b. Best Estimate
c. Low Estimate
20.1 21.3 22.6 22.7 22.7 23.5 24.5 26.1 27.0 27.3
10.4 11.1 12.1 12.6 12.5 13.5 14.1 15.3 15.9 16.1
6.8 8.0 10.1 13.4 14.4 16.2 19.0 22.5 24.9 30.1
3.1 3.9 5.8 8.1 9.2 10.3 12.3 15.0 16.3 20.3
-0.9 -0.2 1.4 2.5 4.9 4.2 5.7 7.4 7.1 10.2
10.9 12.73 15.73 18.73 20.33 20.53 22.8 22.53 24.43 28.53
7.0 8.S3 11.33 13.53 .15.23 14.73 16.3 15.23 16.13 19.23
3.0 4.33 6.83 7.83 9.83 8.73 9.7 8.03 7.43 9.53
9.4 11.1 13.9 16.8 18.2 18.3 20.4 20.0 21.7 25.6
5.6 7.0 9.5 11.6 13.1 12..6 14.0 12.8 13.5 16.4
1.7 2.8 5.1 6.0 7.8 6.6 7.4 5.6 4.9 6.7
.868 .896 .910 .951 1.00 1.009 1.054 1.072 1.104 1.144
.883 .918 .935 .954 1.00 .963 .988 .936 .952 .968
7.8 8.9 11.1 14.1 14.4 16.1 18.0 21.0 22.6 26.3
3.6 4 4.4 4 6.4 8:5 9.2 10.2 11.7 14.0 14.8 17.7
1.5 2.6 3.9 4.2 5.4 6.9 6.4 8.9
12.3 13.8 16.8 19.6 20.3 21.3 23.1 24.0 25.6 29.4
7.9 9.3 12.1 14.2 15.2 15.3 16.5 16.2 16.9 19.8
3.4 4.7 7.3 8.2 9.8 9.0 9.8 8.5 7.8 9.8
10.6 12.1 14.9 17.6 18.2 19.0 20.6 21.4 22.8 26.4
6.3 7.6 10.2 12.2 13.1 13..1 14.2 13.7 14.2 16.9
1.9 3.1 5.5 6.3 7.8 6.9 7.5 6.0 5.1 6.9
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lEstablishment Statistics
2Commodity Statistics
3Interpolated or Extrapolated
4Unadjusted residuals are negative values
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b. Ibid.
2.a. "Estimating Soviet Spending for Military Hardware from Machinebuilding and Metalworking Statistics," Appendix B,
p. 38,,Table B-111, Row I.
b. Ibid., p. 36, Table B-I, Row I
Iliad., p. 37, Table B-II, Row I
3.a. 1966 t 1972: Ibid.,p. 39, Table B-IV, Row I. For all other years multiply Row A of Table B-VII (p. 43) by 1.041
tri and recalculate the residuals.
b. 1966 F, 1972: Ibid., p. 39, Table B-IV, Row I. For all other years multiply Row A of Table B-V (p. 41) by 1.041
u' tri and recalculate tTe residuals.
H c. 1966 $ 1972: Ibid., p. 39', Table B-IV, Row I. For all other years multiply Row A of Table B-VI (p. 42) by 1.041,
and recalculate tie residuals.
4.a. Ibid., p.. 42, Table B-VII, Row I.
b. TH-J., p. 40, Table B-V, Row I.
c. Ibid., p. 41, Table B-VI, Row I.
b. Ibid., p. 47
6.a. Row 2a - Row 5a
b. Row 2b s Row 5a
c. Row 2c r Row 5a
7.a. Row 3a Row 5h
b. Row 3b Row 5b
c. Row 3c.: Row 5b
8.a. Row 4a - Row 5b
b. Row 4b Row 5b
c. Row 4c Row 5b
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